Introduction
Agents and brokers are responsible for directing real estate investors through the process of buying and selling property. Besides conducting a formal agreement between the buyer and the seller, real estate agents are often the first point of contact and source of relevant information. The work and influence of a real estate agent are diverse and plays a significant role in facilitating real estate transactions and attracting potential investors into the sector.
The Need to Learn from International Best Practices
Real estate has a major share in the global economy and is a strategic sector to bring economic and social change in societies. Real estate agents, being at the centre of this development, play a crucial role in creating high standards of real estate transactions, marketing, regulation, development, and investments. On the other hand, unregulated real estate agents can tear down investor confidence in this vital sector. A lack of trained professionals in this field can expose investors to malpractices and misinformation.
Since the real estate sector is one of the most mature forms of investment platforms, countries around the world have developed practices and developments for their real estate agents. The presence of standardized practices for the real estate sector in general and agents, in particular, can help alleviate investor confidence in this vital sector.
Besides this, standardization of these practices with international benchmarks can help in dealing with loopholes in the real estate sector. In addition, a comparative analysis of these international best practices can help Pakistan in devising its way forward for the real estate sector. The content below brushes over some of the most important international practices carried out by real estate agents which includes education, licensing, and associations.
The Importance of Professional Real Estate Education
Most real estate agents do not invest in their education. According to an estimated one-third of real estate professionals, investing in upgradation of their current skill set is not a priority. The professional development of real estate agents is not only beneficial for long-term career prospects but also benefit the larger real estate sector in creating a positive image of the local market.
In addition, it is important for serious and committed real estate professionals to understand the importance of investing in their careers. The global and national real estate sector is dynamic and quickly changing with the advancements in technology. For example, countries around the world are using Artificial Intelligence (AI) and Blockchain technology to facilitate real estate transactions and make the overall market competitive.
Some of the most developed countries around the world host some of the most professional certifications and degree courses in their top universities. For instance, the United Kingdom has the most transparent real estate market globally. Graduate programs in real estate are taught at the University of Cambridge which is one of the best academic institutions in the world. This brings legitimacy and academic backing to the industry making it a field that is based on science and research rather than just an investment avenue.
In Asia, Singapore has some of the best graduate and undergraduate programs for aspiring real estate professionals. Similarly, these countries and others have made it mandatory for aspiring real estate agents and professionals to get a formal education before entering into the real estate business.
In Pakistan, real estate education has been negligible, and no initiative has been taken on the behalf of academia or government to formally integrate or make real estate education compulsory for real estate agents. Recently, Graana.com, Pakistan’s smartest property portal, launched a real estate science certification course with the collaboration of the National University of Sciences and Technology (NUST).
In addition, Graana.com also collaborated with the University of Central Punjab (UCP) to launch the country’s first undergraduate (4 years) degree in real estate management and science. This is a positive step as it will help the country’s real estate sector in receiving lucrative foreign and local real estate investments.
Real Estate Licensing and Designations of Agents
A real estate license allows realtors to legally sell, rent, and broker real estate properties to potential investors, tenants, buyers on behalf of a real estate brokerage. A real estate license can be obtained depending on the requirements of the government or the state institution that governs the sector. A typical license requires that the candidate have 40-150+ hours of formal education and take a licensing exam which requires studying for three to six months at least.
The purpose of issuing a real estate license to qualified real estate agents is to protect common people, potential investors, and homebuyers from fraud and dubious real estate agents. Several developed countries around the world have the proper mechanism of real estate licensing in place. A central commission takes the exam and provides the licenses to real estate agents that have qualified or passed the exam.
The commission has the power to withdraw the license from an agent in case of violation of laws and regulations. Moreover, the commissions can also perform regular audits of trust accounts and conduct investigations into alleged violations of licensing laws and regulations based on complaints filed by the public or the commission itself.
For instance, in Dubai, the principal assignment of its RERA Act included licensing real estate agents as well as activities, overseeing the trust account of developers as well as registering lease agreements.
The licensing requirements by several international real estate commissions are stringent. For instance, in Florida, United States, the state commission has made it compulsory for an individual to complete 63 credit hours to be registered as a sales associate, 72 credit hours from an accredited institution to be registered as a broker. This is reflective of the level of commitment from state agencies towards the professional development of real estate agents.
In Pakistan, there is no concept of a real estate license. The lack of licensing has motivated people with negligible experience in this field to enter the market. As a result, dubious real estate agents and advisors have entered the market, tarnishing the image of the real estate and property dealing sector in Pakistan. The RERA can also adopt the above-mentioned practices and gradually introduce minimum education and training criteria for agents.
Significance of Local Realtors Associations
Another important and relevant practice for real estate agents globally is the creation of local realtors’ associations. The local realtor’s association aims to implement a code of ethics in the local real estate sector to help the real estate agents conform to the local code of ethics. The presence of local associations of realtors will help in establishing a public and private standard of behaviour for realtors. In the United States of America, the National Association of Realtors (NARs) is the largest association of realtors.
The membership of this association allows realtors to automatically become members of both the state realtor’s association and the National Association of Realtors (NAR). The local real estate associations are allowed to investigate and take action against possible violations of the code of ethics. However, it is noteworthy that violation of the NAR Code of ethics does not result in the cancellation of a real estate agent’s license. In other words, real estate professionals are deemed credible when they are held to high standards under which they must conduct their business.
Way Forward for Pakistan
Comparing Pakistan’s current standing on practices and regulations related to real estate agents, there is much room for improvement. The country needs to systematically introduce formal real estate education development to filter out non-professional and inexperienced agents from the sector. The licensing requirement is also an important area that needs to be explored by Pakistan’s real estate agents. Although, the Federal Board of Revenue (FBR) recently made it mandatory for real estate agents to be registered as DNFBPs in the light of the financial action task force’s recommendation, however, this registration does not promise professional development of the real estate agents in general. Therefore, there is an absolute need for the real estate sector of Pakistan to introduce a regulatory authority or a commission that issues licenses to agents based on a standard of professional and educational development. A strong local association of realtors also play an important role in implementing a strong code of ethics amongst real estate agents. Currently, the local association of realtors is fragmented and is not run based on a uniform set of code of ethics or implementation. The country’s real estate needs to implement an effective code of ethics to bring local real estate agents to the same page.
Conclusion
Current real estate practices carried out by real estate agents in Pakistan are not up to international standards. Although efforts to regulate agents are underway, the government in collaboration with industry leaders can implement stringent measures to monitor real estate agents to hold them accountable for their actions. An overview of the international best practices for real estate agents and their professional development clearly shows areas where Pakistan’s real estate sector needs to bring reform.
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