How to select the right buyer’s agent for your next purchase

Rates and Fees verified correct on December 11th, 2016

buyers agentWhen negotiating the purchase of an investment property, the thought of representing yourself may be daunting. A buyer’s agent is a viable option for those who want to access independent advice, expertise and negotiating skills.

From scouting investment properties, bidding at auction and negotiating the sale price and settlement, the buying process can be stressful and time-intensive. A buyer’s agent, also referred to as a buyer’s advocate, can help you locate ideal properties, negotiate a competitive deal, help you realise your investment objectives, and save you considerable time and energy along the way.

What is a buyer’s agent?

A buyer’s agent locates and assesses properties and negotiates the purchase of properties on behalf of the interested buyer. They are licensed professionals that undertake real estate transactions while representing the buyer in the purchase of a property.

Why should I use a buyer’s advocate?

When consulting the services of a buyer’s agent, not only do you benefit from their market knowledge, expertise and negotiating skills, you can also leverage their ability to access off-the-market properties. This means you get early and extensive access to a portfolio of property types through the agent’s network.

Pros and cons for using a buyer’s advocate

Pros

  • Expertise: A buyer’s agent has extensive knowledge of different markets and can help you locate properties in areas with strong capital growth potential.
  • Save time and stress: The services of a buyer’s agent can save you the time and stress required to research the market, scout for different properties, inspect properties and negotiate competitive deals.
  • Objective party: By having a buyer’s advocate on your side, you benefit from having an independent and objective third party involved in the buying process. A buyer’s advocate can ensure that you don’t overpay for a property or purchase a property based on emotion. By providing a candid and professional opinion, they can also ensure that you purchase the right investment property for your strategy.
  • Early property access: A buyer’s agent can access off-the-market properties, which means you have greater choice of suitable properties for your investment decision as well as earlier access to properties that have not yet been advertised for sale.
  • Negotiating capabilities: With professional bidding and negotiating skills, a buyer’s agent can represent you at both private sales and auctions. Attending an auction can be intimidating, particularly if you’ve never bid on a property before, so having someone represent you and bid on your behalf can be a relief to many investors.

Cons

  • Cost: If you use a buyer’s advocate for your investment purchase, you’ll need to be comfortable paying the service fee charged by a buyer’s agent.
  • Conflict of interest: Some buyer’s agents may have a conflict of interest when selling certain properties, so ensure that you select an agent that will serve your best interests.

When should I use a buyer’s agent?

If you’re thinking of purchasing an investment property but you don’t have the time to research or negotiate deals, a buyer’s agent can facilitate the process for you.

Another time when it may be critical for you to use a buyer’s agent is if you’re purchasing property interstate or overseas and you don’t have the time to inspect the property yourself.

How much does a buyer’s agent charge?

Although it will depend on their expertise and the scope of the project, most buyer’s agents will charge 1.5% to 2% of the negotiated purchase price. For instance, if you bought a property for $450,000, you’d need to budget around $6,750 - $9,000 for the buyer’s agent fee.
While most buyer’s agents charge a retainer when they start researching properties, some may charge a lower retainer and take a fee when you decide to buy a property. Try to find a buyer’s advocate based on performance. You should have an honest conversation with your buyer’s agent from the outset so that you can anticipate what their fee will be and what’s included in the price.
Ensure that you factor in the cost of the buyer’s agent fee when doing your purchasing calculations.

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How do I select a buyer’s agent?Must-read--keep-this-in-mind

Selecting an experienced buyer’s agent may form the basis of your investment strategy for the purchasing process. Keep the following considerations in mind when choosing a buyer’s agent.

  • Research: Research the different buyer agencies in your state and contact several of them servicing your local area. You should ask questions that will help you understand their knowledge and experience. For instance, an experienced buyer’s agent will know the market inside out and have a thorough understanding of the financial principles of a property sale in order to negotiate attractive deals on your behalf.
  • Reference check: Do a background check and review the agent’s references and testimonials to see whether previous clients have been satisfied with their performance.
  • Price check: Like any purchasing decision, be mindful that the cheapest price doesn’t always equate to the best quality. Often, the agent’s experience, commitment and knowledge is reflected in their fees. You should also review their price structure and see how this stacks up against other agents in the area.
  • Specify goals and expectations: Once you’ve selected an agent, you need to clearly lay out your expectations and objectives. To get the most out of your buyer’s agent, be clear about the exact type of property you’re looking for and how you want this property to complement your investment strategy. Whether you need the property to deliver a certain rental return (3.5% rental yield, for example) or be within a certain price range, you need to be clear about your criteria to ensure that the buyer’s agent will find suitable properties.
  • Due diligence: Have the same due diligence as you would if you sourced the property yourself. Identify your objectives, forecast your cash flow, conduct market research and consult other professionals where required. You shouldn’t rely solely on a buyer’s agent. If necessary, source second opinions from other property experts or a financial planner about whether or not a deal is right for you.

What questions should I ask my buyer’s agent?

How many years do you have under your belt?

Consider a buyer’s agent with at least 5-10 years of experience to ensure that they have the skills and expertise to identify good investment opportunities. You should review previous client testimonials to ensure a quality service that will meet your investment objective.

What are your industry qualifications?

According to the Real Estate Institute of NSW, all buyer’s agents must hold a real estate agent licence. Find out which industry bodies or associations your buyer’s agent belongs to and what tertiary qualifications they have.

How much do you charge?

It’s a good idea to know upfront about all the costs involved. You should also find out if they act independently or accept commissions from vendors or other agents. This will help you better understand the pricing structure and what’s included in the fees. You should also find out how frequently the agent will provide you with a list of relevant properties.

How well do you know the local market?

It’s important that you source a buyer’s agent with comprehensive knowledge of the local market, including average property prices, which stage of the property cycle the market is in, which streets to eliminate, and whether infrastructure developments are on the council’s agenda.

What’s your network like?

If your buyer’s agent has an extensive network, this can unlock opportunities for you in terms of accessing listings before the mainstream public.

Do you have a conflict of interest?

A reliable agency will only focus on either buying or selling, not both. Make sure your the company your buyer’s agent works for s only representing the buyer. For example, if you opt for an agent who works for a company that also sells real estate, they may not go to the same lengths to find a property for you and may try to match you with some of the real estate they already have available.

How can I find a buyer’s agent?

There are a number of buyer agencies operating across Australia. You can use the Real Estate Buyer’s Agents Association of Australia (REBAA) to find an accredited member agency.

You can also contact your local department of commerce to find out how you can source reliable and trustworthy buyer’s agents in your state.

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Frequently asked questions (FAQ) about buyer’s agents

What’s the difference between a buyer’s agent and a real estate agent?

A buyer’s agent sources and assesses properties and represents the buyer in the bidding and negotiating process, whereas real estate agents 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 to get the highest possible price for the property.

What is the primary service provided by a buyer’s agent?

Buyer’s agents are responsible for searching for different properties to satisfy the buyer’s criteria and negotiate the purchase of the property either by private sale or auction. Buyer’s agents also often represent their clients by bidding for them at auction.

What kind of activities does a buyer’s agent undertake?

Some of the common roles and responsibilities of a buyer’s agent include:

  • Carry out research and identify relevant properties
  • Assess the quality of different properties
  • Bid for you at auction
  • Accompany you to property viewings
  • Conduct enquiries with council and local authorities where required
  • Negotiate on your behalf
  • Interpret contracts for you
  • Manage the settlement process

What is the fee structure charged by buyer’s agents?

The fees will vary depending on the agent and the level of service and involvement. However, as a general guide, buyer’s advocates charge between 1.5% and 2% of the property purchase price.

For ‘negotiation’ buyer agent services, where the agent negotiates a property price before, during or after auction, a flat fee or a percentage of the property price is usually charged, such as 1% of the final purchase price.

However, if you require a buyer’s agent to just bid for you at auction, fees start at about $600 per auction.

The main fees include:

  • An initial fee
  • A standard/fixed fee for specific services such as bidding at auction
  • A variable fee, such as a percentage of the property price

Is the fee tax-deductible?

If the property is an investment, the buyer’s agent fee is generally tax deductible. It’s a good idea to check with your accountant or financial advisor.

Are there any hidden costs?

Be mindful that there may be other costs associated with the researching, purchasing and negotiation process. For example, you may have to pay for costs that arise from researching property, such as accessing a copy of the strata plan from the local authority.

Is it worth the investment?

According to the REBAA, a buyer’s agent may cost you more upfront, but they can potentially save you thousands in the long term.

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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