Project Sales in Real Estate: Big Rewards, Bigger Risks
For many real estate agency bosses, project sales—selling new launches for developers—seem like the holy grail. A single project can have hundreds or even thousands of units available. Unlike subsales, where you constantly need to hunt for new listings, projects allow you to work with just one seller: the developer.
Even better, the commissions are attractive. Developers today often offer between 3% and 5%, with struggling projects going even higher. Sell multiple units, and the rewards can look life-changing. Add the convenience of not having to manage multiple vendors, and it’s no wonder so many agencies rush into the project sales game.
But behind the glitter, the risks are real—and sometimes devastating.
The Hidden Risks of Project Sales
- Slow or Withheld Commissions
Developers offering “zero down payment” packages often prioritize contractors and miscellaneous costs when the bank releases funds. Your commission may be delayed for months—or even up to three years.
- Developer Bankruptcy
This is every agency’s nightmare. You sell hard, close multiple units, and then the developer collapses. Commissions vanish overnight. Agents won’t blame the developer; they’ll blame you, the boss, because they acted under your agency. If you don’t pay them out of your own pocket, they may quit—or worse, take legal action.
- Advancing Commissions
To retain agents, many agencies now advance commissions immediately, funded through P2P lending, bank borrowings, or internal reserves. But if the developer underpays or defaults—say, paying 2% instead of the promised 5%—the agency bears the loss. Ten profitable projects can be wiped out by one failed launch.
- Exclusive Sales Agreements
Some agencies try to secure exclusivity by guaranteeing developers a fixed amount upfront. If sales fall short, the agency either forfeits the deposit or must purchase unsold units. In a weak market, or if the developer goes bankrupt, this strategy can cripple a firm financially.
Protecting Your Agency
Given the stakes, due diligence is not optional—it’s survival. Before taking on any project, agencies should:
- Check the developer’s payment history: Do they pay agents on time?
- Review past projects: Were they completed as promised?
- Study the ownership structure: Who’s really behind the company, and what’s their reputation?
- Negotiate the appointment letter carefully: Don’t sign boilerplate agreements without legal review.
- Ask banker friends: They often hear whispers about financial health before the public does.
- Confirm payment schedules in writing: No verbal promises.
- Test their trustworthiness: If something feels off, it usually is.
A Bigger Industry Question
Every year, agencies in Malaysia get burned by abandoned projects and unpaid commissions. Perhaps it’s time for a structural solution. In China, Beike requires developers to place commissions upfront in an escrow account. Agents and agencies are protected because the funds are secured before sales begin.
Should Malaysian agencies form an alliance to demand the same? Until then, the best protection is your own due diligence—and the discipline to walk away from deals that look too good to be true.
