From scouting for potential properties to the day of final settlement, buying a property can be stressful and time-consuming at the best of times. Enter the buyer’s agent.
Sometimes called buyer advocates, these licensed professionals help you navigate the property market and find your dream home or investment at the best possible price. In exchange, they charge a fee or commission.
A buyer’s agent specialises in researching, evaluating and negotiating a property purchase on behalf of an interested buyer. There are 2 main services an agent can perform for you:
Sometimes referred to as full service, this is a common option if you’d like assistance with your purchase from start to finish. It includes searching for properties that meet your criteria, negotiating the sale price and bidding at auction.
You can also employ a buyer's agent just to bid on a property that you have found yourself. Auction bidding is not for the faint-hearted, so it can be helpful to have an experienced professional represent you on the day. This option is often taken up by interstate or overseas buyers.
A buyer's agent sources and assesses properties and represents the buyer in the bidding and negotiating process. A real estate agent however will typically represent the seller of the property.
While buyer's agents negotiate for the lowest possible price, real estate agents are usually compensated by the vendor, so they want to get the highest possible price for the property.
Working with an experienced agent can make a significant difference to your property purchase. Agents can help with:
Fees vary according to the services the agent is employed to perform, but they're usually charged as either fixed fees or commission.
Under the Australian Consumer Law, buyer's agents must provide you with a single price for their services. The amount quoted to you will typically include GST unless the agent clearly states that GST will be an additional expense.
In spite of the cost, provided you do your research and choose an agent who’s transparent about their fees from the outset, a buyer’s agent could save you significant money in the long run.
You can read more about buyer's agent fees in our full guide.
You should always speak to a tax professional, but generally, if you hire a buyer's agent to help you purchase an investment property their fees are not tax deductible against your income tax in the year you buy the property.
However, they can be included in the cost base for capital gains tax (CGT) purposes. This provides a tax benefit when you eventually sell the property, as the fees you paid the buyer's agent will be added to the property's cost base and reduce the amount of CGT you owe.
Example: let's say you buy a property for $800,000 and pay a buyer's agent's fee of $20,000. Then you sell that property 5 years later for $1m. You have made a gain of $200,000. You'll be able to add the buyer's agent's fees, plus other costs like stamp duty, to the property's "cost base". In this example, let's assume stamp duty was $25,000.
This means the cost base would become:
$800,000 purchase price
$20,000 buyer's agents fees
$25,000 stamp duty
Total = $845,000
The capital gain is now $1m minus $845,000, so it's $155,000 instead of $200,000.
Because the asset has been owned longer than 12 months, you're entitled to the 50% CGT discount, so your total capital gain is $77,500.
Whether you're buying a home or investment property, having the right guidance can make all the difference. A buyers' agent, or buyers' advocate, can provide expert advice, access to off-market properties, give accurate price estimations and use their negotiation skills to ensure you get the best deal.
Rich Harvey, economist and CEO and founder of propertybuyer.com.au, says a good buyers' agent could find your next property within 30 to 60 days, compared to the average buyer time of 12 months without the help of a buyer's agent. Here's his suggestions for questions to ask to get the best buyer's agent:
1. What is your experience and track record?
A buyers' agent with a substantial track record in the industry will have a deep understanding of the market, local trends and sharp negotiation tactics. Look for agents who have been in the business for several years with a proven history of successful transactions, and ask for case studies or testimonials from previous clients.
2. How well do you know the local market?
A good buyers' agent should understand the nuances of different neighbourhoods, property values, and future development plans that could impact your property choice, and provide valuable insights into the best streets to buy, potential growth spots and areas to avoid.
3. What are your professional credentials and affiliations?
Buyers' agents must be licenced in each separate state. Check if the buyers' agent is a member of professional organisations such as the Real Estate Buyers Agent Association of Australia (REBAA), the Property Investment Professionals Association (PIPA) or state-based bodies like the Real Estate Institute of New South Wales (REINSW). Membership in these organisations indicates a commitment to high ethical standards and ongoing professional development. Also, look for agents who have won multiple awards and have a strong reputation in the industry.
4. How much do you charge?
The agent should be transparent about their fees and any additional costs that may arise during the buying process. Compare the fees of different agents to find one that offers good value for their services. Most agents will charge between 1.5% to 3% for the full search service and around 0.75% to 1% for the negotiation only service. Be wary of agents who are not upfront about their fees or seem excessively expensive without justification. Like with any professional service, the cheapest is not always the most cost-effective.
Once you have a shortlist of 2 or 3 potential agents, ask each of them some questions to land on your perfect match. You might even want to treat this as though you’re interviewing someone for a job:
"When selecting a buyer's agent, it's crucial to consider their experience and track record. Opt for agents with a proven history of successful client purchases, ideally over multiple property cycles, as newer agents might lack the necessary expertise to manage your life savings effectively. Evaluate the buyer's agent strategy they follow, such as buy and hold, development, commercial investing, or high-yielding versus lower-yielding blue-chip investing. It's wise to follow a company whose founder is in a position you aspire to reach. Additionally, consider the size of the company; larger firms typically have well-refined processes developed over years, benefiting their clients. This aligns with the importance of a strong track record, ensuring that the buyer's agent you select is well-equipped to guide your investment decisions."
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Hi,
I’m about to set up a SMSF and wanting to invest in residential properties. I was told to use buyers agent to help me buy worthy, best performing investment properties. Can you please help me select reputable buyers agent that can source or have their presence/offices in all/most Australian states. Also their rates/fees if available?
Thanks Kindly,
Aiden
Hi Aiden,
Thanks for the question.
To find a reputable buyer’s agent, I would recommend looking for a member of the Real Estate Buyers Agents Association of Australia (REBAA) from their website. This is the professional body for buyers agents in Australia and allows you to search by state. ou may also read our guide to buyer’s agent fees and commissions.
I hope this helps,
Marc