Should I Use A Buyer’s Agent?
Purchasing a property as a home or an investment can be quite daunting for many people. It is likely the most expensive purchase many people make and doesn’t occur often. 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 judgment and understanding of property. This can lead to overpaying or purchasing a property that wasn’t what the buyer expected. To mitigate these concerns a buyer may enlist a professional Buyer’s Agent in order to purchase a property that meets the buyer’s parameters on their behalf.
A buyer’s agent is enlisted by the buyer to assist them in their purchase. When selling a property, a real estate agent markets a property and aims to get top dollar from prospective buyers. In contrast, a Buyer’s Agent works for the buyer and aims to get the best value for money based upon the buyer’s criteria. A buyer’s agent can work for both home buyers or investors. Although, in most cases, their services cater to investors.
However, we will concentrate on the role a buyer’s Agent can play for the investor.
Benefits Of A Buyer’s Agent?
There are numerous benefits to using a buyer’s agent, each of which can assist a prospective buyer. 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 investor’s 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.
- Helping to avoid mistakes for the investor.
As illustrated the value provided for investors is quite extensive. Although an investor may not need help with all of these they might find value in one of two of these benefits.
Why Use A Buyer’s Agent?
So, by now understanding what a buyer’s agent can do for the investor the question may arise why an investor would choose to use their services? Similarly, to the outlined list mentioned, investors may be of the following:
- Lack of 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.
An investor may need assistance with any one of these issues, where a buyer’s agent may assist in filling this void.
How Much Does A Buyer’s Agent Cost?
Buyer’s agents generally have two forms of payment models. The first model is a fixed rate and the other model is a percentage of the sale price. The percentage of the sale price model is usually around (2%) of the final sale. The investor will pay the buyer’s agent the agreed percentage of the final sales price upon settlement of the property. This model appears counter-productive for the investor as it gives the agent an incentive to pay more for a property. This is the opposite of what the investor is trying to achieve when engaging a buyer’s agent. Even with a higher budget, it would be concerning knowing the agent is incentivised to purchase more expensive properties.
A fixed-rate fee model is the most common form of payment for a buyer’s agent. The investor pays a retainer (usually of 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 price range as many agencies dictate their fixed fee by price brackets. 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. Although this is a ballpark figure and many agencies charge vastly different fees for their service.
Which Buyer’s Agent To Choose?
It is clear to see the value a buyer’s agent can provide to a buyer. Although there is a range of buyer’s agents, not all buyer’s agents are the same. Just like any service the quality of their service may widely differ. It is important to identify how to differentiate between buyer’s agents and their services. There can be a range of variables to consider when looking to engage a buyer agent. Just because an agent charges a higher fixed fee does not mean they provide a better service. It is the investor’s responsibility to determine the quality of the agent they are looking to engage and if they will deliver the services they propose. Things to consider could include:
- Does the agent practice what they preach? Are they a successful investor and have a portfolio themselves that can prove to you to show 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 than 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 in? 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 align 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 that aren’t investment-grade then it may be 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 that will help drive the investor towards their financial goals.
To conclude, there is a lot of value a buyer’s agent can provide to a property buyer. They can be an extremely beneficial individual to add to your property team. Whether it is a seasonal or novice buyer there is a range of advantages to working with a buyer’s agent. Ultimately, it is the buyer’s decision as to whether they should engage an agent and If they see the value in utilising their services. Moreover, it is the investor’s 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 purchasing quality investment properties.