Buying a new home or investment property is one of, if not the biggest purchasing decisions you’ll make in your lifetime, so it pays to know a bit about what you’re getting yourself into and how the real estate game works.
If you’re just starting out you mightn’t have heard of a buyer’s agent. Just like real estate agents who help you sell a property, buyer’s agents work for you and act on your behalf when searching, evaluating and negotiating a property purchase. But they come at a cost. There are different ways buyer’s agents can help, so keep reading to find out whether you might benefit from their services.
What buyer’s agents do
Buyer’s agents can offer either full or partial services to help you find the ideal property for you. Full service means the agent manages the entire process for you, which generally includes:
- A needs analysis to understand your requirements, including ‘must haves’ versus ‘nice to haves’
- Search and research the market
- Inspect and short-list suitable matches which you can then view
- Evaluate recent sales data and provide a written appraisal
- Due diligence such as building inspections, pest, survey and engineering reports
- Negotiate the property purchase price and terms
- Oversee the contracts and exchange
- Pre-settlement inspections
- Asset/property management/leasing
You can scale it down depending on your needs. If you don’t mind doing the search and inspections, you could just get their expertise in evaluating the property, handling the due diligence or doing the auction bidding or buying once you’ve found the right property.
What buyer’s agents cost
REBAA, the Real Estate Buyers Agents Association of Australia, says buyer’s agents’ full service fees typically range from 1.5-3% + GST of the purchase price. Fees will vary depending on the brief, search area, purchase budget and complexity involved. Some may charge an initial retainer fee upon engagement with the remainder of the agreed fee paid when the contracts are exchanged unconditionally, while others may accept payment only when you exchange or settle. For time-poor professionals or people who are easily stressed, this may seem like a small price to pay. Keep in mind that just 2% of the purchase price of a $600,000 property is $12,000, or 10% of a 20% ($120,000) deposit. This cost alone may be preventative for many buyers who need every penny they’ve saved to go towards their property purchase. Using a buyer’s agent just to handle the sales process and negotiate the price or bid for you at auction can cost a lot less, and having an expert without the emotional attachment to handle the buying process can eliminate a lot of potential stress.
Buyer’s agent benefits
- Get the upper hand by using an expert who can separate sales hype from fact
- Access local knowledge and insight if relocating or purchasing in an unfamiliar area
- Remove emotional influence and risk of thinking with the heart instead of the head
- Buyer’s agent fees may have tax benefits for investors
- Access more properties including off-market (silent listings) unlisted or pre-listings before they’re advertised
- Save money by securing your property for a lower price (potentially)
- Free up time that would have otherwise been spent trawling the internet, calling agents and trekking around open homes every weekend
- Eliminate stress!
Buyer’s agent burdens
- Fees, especially for full service, may be preventative for many buyers
- Risk of missing an emotional connection with your home – it may tick all the boxes but lack that all important ‘feeling’
- If your buyer’s agents’ fee rises with the purchase price they may be incentivised to pay a higher price
- Dodgy buyer’s agents double dip and receive commission from vendors or selling agents too, so make sure yours is a licensed ‘independent’ or ‘exclusive’ agent
- If you aren’t sure or can’t communicate exactly what you’re looking for you won’t get the right property
- Upfront payment instead of a performance based payment may leave you out of pocket and property-less if your agent hasn’t successfully done their job
- Be careful of delegating due diligence entirely as buyer’s agents don’t guarantee a property’s profitability or performance.
Have you used a buyer’s agent? Tell us your experience in the comments below.
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