Should you use a buyer’s agent?
Property investors, both new and experienced, often turn to buyer’s agents to help them find the right property and accelerate the growth of their portfolios – but do you need to pay for their help when you could just do it yourself?
Buyer’s agents (or buyer’s advocates) are professionals who specialise in working for you, the property buyer. A good buyer’s agent will be skilled at evaluating the various property markets across the country, identifying growth drivers and regions set to surge, locating a property that caters to your financial and personal needs and negotiating a sales price and contract conditions that suit you, the buyer.
Why use a buyer’s agent?
Buyer’s agents offer a range of services that can help property investors accelerate the growth of their property portfolio and sometimes even access property deals that haven’t yet hit the open market.
Property investors often engage the services of a buyer’s agent when they are time-poor or when they’re looking to purchase a property in a region they’re unfamiliar with – but there are also a number of other reasons why you might consider employing a buyer’s agent, such as:
• If you are uncomfortable with the price negotiation process or want someone who is less emotionally invested in the purchase
• If you have limited knowledge of what property types/areas make sound investments
• If you are unaware of market values or worry you may overpay for a property
• If you need someone to bid at auction for you
• If you want to capitalise on someone else’s knowledge and experience to grow your portfolio rather than do it all yourself
Depending on what you need from your buyer’s agent and their level of experience, they may be able to take care of the entire process for you. Others may simply help you get a good price on a property you’ve sourced yourself.
Property investors often use the full suite of buyer’s agents’ services and may seek advice about how much rent to charge, how to attract tenants to the property and what renovations may suit the property and the market for prospective tenants.
Unless the buyer’s agent holds an Australian Financial Services licence (AFSL) though, they cannot provide you with financial advice.
How much does a buyer’s agent cost?
There is no standardised costing model for buyer’s agents, and much like other contractors and business people, the fees for engaging a buyer’s agent will vary depending on what they’re offering, how much help you require and the professional’s level of experience.
The Real Estate Buyers Agents Association of Australia (REBAA) says that as a “very general guide” property buyers can expect to pay between 1.5 and 2 per cent (plus GST) of the property’s purchase price if you’re using the buyer’s agent’s full services.
Some buyer’s agents may instead offer a fixed fee depending on how much work is required and your individual needs. Buyer’s agents may also offer a fixed fee to discourage you from targeting certain property price points, and instead focus on the best property for your portfolio.
According to REBAA, if you only require the price negotiation skills of a buyer’s agent, fees will typically be set at around 1 per cent (plus GST) of the total purchase price.
Buyer’s agents can also bid on your behalf at auctions to ensure you pay a good price, don’t go over your budget and outsmart the competition. REBAA says in these instances you can expect to pay upwards of $500 for every auction the buyer’s agent attends on your behalf.
It’s important to bear in mind that there are no hard and fast rules for how much buyer’s agents charge for their services. Buyer’s agents fees will vary depending on your budget, where you’re searching, your individual financial circumstances, the size and scope of your property portfolio and any additional specific requirements you have that may add to the agent’s brief.
Is using a buyer’s agent worth it?
Part of what you’re paying a buyer’s agent for is to provide you with individualised and impartial advice. They should be acting entirely on your behalf. Where a seller’s agent’s job is to secure the highest price for the vendor – or any other special conditions that the vendor may be seeking from the sale – a buyer’s agent’s primary focus should be getting you a good deal that suits your personal circumstances.
At first glance, a buyer’s agent’s fees may seem like an additional cost burden that you don’t need when you’re already spending so much on the property purchase (and all the extras that come with it!).
Those who benefit from using buyer’s agents services, however, will tell you that the advantages outweigh the costs – and that the fees are a small price to pay for peace of mind, a good deal and a secure property portfolio.
Advocates of buyer’s agents will tell you that these professionals can source properties for well below their ‘true market value’ in locations that are about to experience significant capital growth.
They do this through their network of real estate contacts, who have access to distressed or unusual sales that often need to me moved quickly. These vendors and selling agents can be flexible on price and sales contract terms to secure the quick sale.
Investors who don’t use buyer’s agents – and lack reliable contacts on the selling side of the equation – can be left frustrated when good deals are snapped up before they even properly hit the market.
Buyer’s agents also spend their days studying property markets across the country and likely have access to more data and pricing information than most every day investors.
The initial cost of the buyer’s agent is thus justified by the benefits they offer and the money they ultimately save you.
Investors should also speak to their accountants about whether the cost of using a buyer’s agent will be tax deductible.
Choosing a buyer’s agent
If you decide to use a buyer’s agent to help you grow your property portfolio, you need to make sure that the services they’re offering you and the results they will achieve are worth the additional cash you’re parting with.
The results your buyer’s agent achieves for you should benefit your bottom line and reduce your stress levels.
Word of mouth from other successful investors, or those working towards similar milestones as yourself, can be a great way to find reputable and hard-working buyer’s agents who can supercharge your property portfolio.
To find the best buyer’s agent for you though, make sure you do your research and ask anyone you’re considering working with the following types of questions:
• How much experience do you have?
• Do you have any relevant qualifications? How do they help you do a better job?
• Do you own property yourself?
• How big is your property portfolio?
• Where and what are you buying at the moment?
• How many properties did you buy last year?
• What is the most I can expect to pay for your services?
• What happens if I’m unhappy with the performance of my property/properties?
• How do you source the properties you offer to clients? Do you have any relationships with developers or people selling stock?
• Do you have any existing clients I can speak to?
• Do you have professional indemnity insurance?