When purchasing a property as a home or an investment property it can be quite daunting for many people. Purchasing a property is likely to be the most expensive purchase many people make and usually only occurs a couple times in their lifetime. Regardless of the purpose, every buyer wants to ensure they get the most value for the price they pay, and the property meets all their requirements. Without any experience and education comes a lack of judgement and understanding for property, which in turn can lead to overpaying or purchasing a property which wasn’t what the buyer expected. To mitigate these concerns a buyer may enlist a professional Buyer’s agent in order to seek out and purchase a property which meets the buyer’s parameters on their behalf.
When selling a property, in most cases the vendor utilises the services of a real estate agent who markets the property and aims to get top dollar from prospective buyers. In contrast, a Buyer’s Agent works for the buyer and aims to find a property for their buyer based upon the buyer’s criteria. As mentioned previously, a buyer can work for a home buyer and an investor. However, we will concentrate on the role a buyer’s agent can play for the investor.
Benefits of a Buyers Agent
There are numerous benefits of using a buyer’s agent, each of which may fill the void of what the investor may be needing assistance with. These can be seen as the following:
· Access to off-market properties.
· Expertise within an area or region.
· Have contacts within the industry.
· Identifying the best property for the investors criteria or goals.
· Saving the investor time.
· Completing the negotiations of the sale.
· Organising all the associated paperwork.
· Ensuring a smooth purchase from A-Z.
· Avoid many mistakes for first time investors.
As illustrated the value provided for investors is quite extensive. It is also important to note that an investor may not necessarily need assistance with all of these areas of assistance but may still engage a buyer’s agent for two or three of their advantages.
Why Use a Buyers Agent?
So, by now understanding what a buyer’s agent can do for the investor the question may arise why an investor may utilise a buyer’s agent’s services? Similarly, to the outlined list mentioned, investors may be of the following:
· Time poor.
· Lack experience and knowledge.
· Don’t have the industry contacts.
· Can’t find the right deal in a competitive market.
· Don’t have the expertise for a particular area or region
· Looking for guidance throughout the buying process.
· Ensure how to buy an investment property.
As outlined an investor may need assistance with any of the mentioned requirements and thus may engage a buyer’s agent to assist in filling the investors void.
How Much Does a Buyers Agent Cost?
Buyer’s agents generally have two forms of payment models, the first being a fixed rate and the other being a percentage of the sale price. The percentage of sale price model is usually around (2%) of the final sale where the investor will then pay the buyer’s agent the proportion of the final sales price upon settlement of the property. This model seems quite counter-productive for the investor as it gives the agent an incentive to pay more for a property which is the opposite of what the investor is trying to achieve. Even if the investor has a higher budget, a percentage model would seem misleading and it generally isn’t used too often from Buyer’s agencies. A fixed rate fee model is the most common form of payment which seems the investor pay a retainer of usually a couple thousand to the agent to engage their services. Upon settlement of the property the investor then pays the remaining fixed rate fee to the agent. This fixed fee can have a wide range as many agencies dictate their fixed fee by price brackets of property. For example, properties up to $500,000 may cost $10,0000. While properties above $500,000 may cost twice as much. The starting rate for most Buyer’s agencies at the moment is around $10,000 plus GST on top of that, however, there are some which charge a lot more than this.
Which Buyers Agent to Choose?
By understanding the value that a Buyer’s agent can provide it would also be important to identify which Buyer’s agent to use and how to differentiate between them. Things to consider could include:
· Does the agent practice what they preach? Are they a successful investor and have a portfolio themselves which can prove to you they are a successful and knowledgeable investor?
· Do the agent’s services fill the “void” in what the investor is looking for? For example, if the investor is looking for a specific type of property is the agent able to obtain this property with their contacts and expertise?
· Does the agent provide the investor with more value that what their fees are? Utilising a Buyer’s agent can be a quite expensive service so the investor will want to get the most value out of the agent?
· Does the agent understand the market they are investing it? The agent does not necessarily have to live in the market to understand it, but the investor will want to decipher if the agent is actually knowledgeable about the area and knows the driving factors behind growth with that area or region.
· Does the agency have a proven track record? By looking at the agency’s website the investor should be able to see reviews or evidence of past purchases from the agent. Do they have similar property purchases which aligns with the investor’s goals? Is the review from previous clients positive?
· Lastly, does the agent have a hidden agenda? If the agent is only purchasing in one area or recommending properties which aren’t investment grade then it may be the that the agent is simply showing poor quality properties or is only searching within a small cluster of suburbs. The buyer’s agent shouldn’t be limited within their search and should ensure they do their very best to find properties which will help drive the investor towards their financial goals.
To conclude, there is a lot of value a Buyer’s agent can provide to the investor. Whether it is a seasonal or novice investor there are a range of advantages with working with a buyer’s agent. Ultimately, it is the investors decision as to whether they should engage an agent and If they see the value in utilising their services. Moreover, it is of the investors due diligence to ensure the agent they engage are credible and will provide the investor with the most value. Hopefully, by reading this it will help to make a better-informed decision around using a Buyer’s Agent and how they may assist in making educated investor decisions.