May 28, 2011 4.45am
8 hours after my Paper 3 Examination - Real Estate Agency Practice and Regulations (around 30 candidates, mostly from my class). The day before, Paper 2 - Real Estate Assets and Markets (over 100 candidates). Paper 1 - Legal Famework of Real Estate (around 30 candidates).
I would like to share my REA Examination experiences which may be useful to some readers.
1. There are two examinations for almost all people wanting to be approved to work in the real estate in Singapore. One is called RES which is said to be simpler (for salesperson) and one is called REA (3 papers must be passed aone sitting).
2. The Council For Estate Agencies (CEA) has powers to impose a fine of at least $75,000 any illegal housing agent (now called 'salespersons") or agency owners (which now must have a CEA-approved KEO - Key Executive Officer).
3. Profile of the REA examination candidate. Said to be more mature persons (over 30 years of age). I had supper with 7 classmates till almost mid-night at McDonald's yesterday and I believe they are representative of the applicants.
3.1. Chinese. 5 men (4 married, 1 being a single over 35 years old), 2 women (married). I shall call them M1 (single), M2,M3,M4,M5 & W1,W2.
3.2. Working in the real estate agency for at least 3 years and has 30 transactions to qualify as a KEO - 3/7. Of the 3 people, 2/3 are given provisional REA licences till Dec 31, 2011 and are required to pass the REA exam to be licensed. These are M4, M5(myself) and W1.
M5(myself) and W1 failed to renew our annual housing agency licence issued by the IRAS because the IRAS had implemented an equivalent policy of "caveat emptor". In caveat emptor = "buyer beware" (examination question in paper 3), the buyer is responsible for what he buys. Since our faults were not due only to not renewing the licence yearly, CEA requires us to pass the REA examinations by Dec 31, 2011 or else thrown to the wolves.
1/3 is a partner in his realty firm (2 partners). His partner is CEA approved KEO. CEA demands that he sit for the REA examination. I call him M3.
DETAILS OF THE 7 PEOPLE DURING SUPPER
lst person - M1 - Late 40s. A single man with a face full of stresses is in the sunset industry of chemical trading agent as a one-man-operation. The internet has considerably reduced his business as clients can source direct. He was advised by the lady to take the REA examination. Now he discovers that he still needs 3 years and 30 transactions even if he passes the REA exam. However, the REA qualification is valid only for 2 years. That means he can't be the KEO, in theory since he needs to work in the real estate legally managing a team of salespersons for 3 years. He can't practise as a realtor unless he sits for the CES exam to become qualified as a salesperson under the Estate Agency Act 2010. Therefore, he was given incorrect advice (his classmates tell him about vicarious liability for the owner of the training agency and sue to get back his money!).
2nd person - M2 - mid 30s, is a marketing communications consultant and lecturer who sells boats as a sideline.
3rd person - M3 - mid 50s, the partner in the realty firm given the provisional REA licence.
4th person - M4 - mid 30s, is in the fund-management industry. Extrovert with an idea of forming a consortium amongst us to do something.
5th person - M5 - myself - over the hill at 60. A director of a realty firm given the provisional REA licence practising as a veterinarian.
6th person - W1 - slim, petite, fair complexion, friendly and assured. Closely cropped hair-style. Given the provisional REA licence. Now working from home, being granted by the HDB promptly, a Home Office licence. The married woman now has his home office (approved by the HDB, address changed notified to the CEA within 14 days). "Did you install the smoke detector in the ceiling (not practical in the HDB flat) and buy the fire-extinguisher?" I asked as I had studied this topic for the exam. She did. "The smoke detector is the portable type," she said. "Some of the government the policies are rather silly. I need to buy a 2-kg fire extingisher. My office is just my study table in the living room."
7th person - W2 - confident, friendly impression, motherly. A salesperson for a realty firm with 3,000 salespersons. Manages 2 salespersons.
Thanks to the CEA, I get to know more about my classmates and their aspirations. All 7 drive, except for M1. I gave him a lift home for the past 2 nights to Tampines as it was already 10 pm after the exam and he was really stressed out. Even the office girl invigilating part-time in the school noted his demeanour and told me.
FEARED EXAMINATION QUESTION ON HDB LOAN IN PAPER 2.
I asked my 6 classmates who had attempted the exam and what was the answer for the amount of monthly mortgage payments? My answer was $447 or some figure around $447. Two of my other classmates (not the 6 during supper) had mentioned around $800 and $1,000 respectively.
M1 said he had miscalculated as he had deducted the $30,000 CPF housing grant, forgetting that the Buyer (a couple) in the exam question was buying a new HDB BTO flat for the first time. When you buy new HDB flats, you don't get the CPF housing grant. Only when you buy a resale HDB flat in the open market and a new Executive Condo (managed by the HDB after construction by a private developer and therefore EC are not HDB flats). So many confusions. M1 had around 10 minutes to answer. I had around 15 minutes. The question was for 30 minutes and worth 20 marks. Once you deduct $30,000 from the quantum of loan, you are in deep trouble. My advice is to do at least 50 of such calculations at home for different scenarios and schemes of HDB housing loans but we never did.
The question is as follows, if I can still recall.
Couple earning $6,000
Got a new HDB BTO flat at $350,000.
Given a concessionary loan. 2.6% interest for 30 years at monthly rest
Used CPF to pay the 1.5% stamp fees and legal fees during booking.
After 2 years, they get the keys to their flat.
They have $68,000 in the CPF.
1. What is the amount of downpayment during booking?
I wrote 5% of the purchase price. This is the tricky part since HDB borrowers are given 90% of the purchase price or valuation whichever is lower and the valuation price is not stated. I did not qualify that purchase price is assumed to be valuation.
2. What is the amount of to be paid when the keys are collected.
I wrote 5% of the purchase price on collection of keys. Am I correct? I had little time to think as I had 5 minutes left. If keys are collected, sales is completed. Therefore the amount to be paid should be the balance in cash. It would be more detailed calculation. Should I state amount less $5,000 option fees, less CPF $68,000, less paid stamp and legal fees?
I had no time to think as the next parts were how much is the monthly mortgage and how much is the CPF used to service the monthly payments.
To figure out the monthly mortgage, with no past practices, I used 2.6% X HDB loan approved ($350,000 - stamp & legal fees - CPF $68,000) x 30 years divided by 360 months and arrived at around $400/month. This is the time-taking part since I had never done this calculation during my 70 hours of lectures and my lecturer had not thought of making us do such calculations too. Who would have thought that the examiner would test us on how to calculate the monthly mortgage payments?
How about the payment of the first 5% at booking and another 5% at the collection of keys? I did not include these 10% inside the above calculation to deduct from the $350,000. So, I might have got the wrong answer. What is interest at monthly rest? Is this a red herring?
So, it may be wiser not to attempt such a question. But I had no choice as this was the 5th question which I thought I had some chances of getting 10/20 marks. Now, it seems I may be getting correct answers for the 5% during booking and 5% during key collection. That may be 4/20 marks. So, never attempt such questions unless you are in active work in the HDB sales.
As for the amount of CPF the couple will pay monthly to service the loan, I did not know how to calculate. There was something I remember having read (Mr Mah Bow Tan's example of a sale of a 4-room HDB flat in the Straits Times had given the 23% but I did not recall. He did mention about the 5% for booking and key collection as under the "staggered payment scheme" - not lectured.
According to M1, it should be 23% of the couple's income of $6,000.
In conclusion, this type of question can be killers. Therefore, don't attempt it if you have a choice since you can get zero marks if you miscalculate as in the case of M1 who had deducted $30,000 as the CPF housing grant which is never given to buyers of NEW HDB flat!