It’s so cliche it’s almost comical. As soon as the markets start ramping up again, the property industry’s negative stereotypes start re-emerging to take part of the action. Targeting beginner investors and first home buyers who haven’t sharpened their ‘scam radar’ yet, these operators are coming up with offers that are almost irresistible. Offers such as “free service”, “discounts”, “guarantee” and “no risk investments” are used as baits to get people interested. The buyer’s agent space is no exception. With its growing popularity, the industry is becoming the next frontier for these unsavoury characters. As such, if you’re looking to engage one, make sure you vet them carefully to avoid losing money in the long run. Here are quick and easy ways to separate the wheat from the chaff.
Checklist for choosing the best buyer’s agents
- How many years have you been operating in this space?
- Do you have a property portfolio yourself?
- How many properties have you bought for your clients and for yourself?
“Look for a buyer’s agent who has a relatively big portfolio and is making a lot of money from their own properties and not just from fees for buying property for other people,” advises Chris Gray, buyer’s agent
and property expert.
“If you’re an investor and you’re using a buyer’s agent who doesn’t have a property portfolio, how good are they going to be in finding you a property if they can’t even find a property for themselves? Someone who’s built themselves a large portfolio is more likely to help you get rich as they’ve already done it themselves.” - Chris Gray
- Are you an accredited REBAA member?
- Are you licensed by the Real Estate Institute of Australia to buy in this specific state?
Zoran Solano, senior buyer’s agent with Hot Property Buyers Agency
, urges you to make sure you check the buyer’s agent’s accreditation. “See if they are accredited with Real Estate Buyers Agents Association (REBAA), Australia’s largest independent alliance of buyer’s agents who act on behalf of buyers in property transactions,” says Solano. REBAA members are obliged to commit to strict ethical standards and professionalism according to Solano, who is also the Queensland representative for REBAA. “Buyer’s agents also need to be licensed real estate agents in the state that they’re buying the property in. We see a lot of Sydney and Melbourne buyer’s agents buying into the Brisbane market who don’t have the appropriate licence to buy a property in Queensland. As a consumer you need to make sure that the person you’re working with is licensed in that state,” he says. If they don’t have a licence, that’s already a warning sign that they’re not legally able to work in that market.
Depth of knowledge
- Why do you think this area will experience capital growth?
- How do you analyse the potential of a specific property?
If you’re outsourcing the buying to a buyer’s agent, you want to make sure that they actually understand the market dynamics and know how to assess the investment potential of a certain property. They should know what would trigger capital growth and rental growth in the area. “It’s not just the length of time that they’ve been operating as a buyer's agent; it’s also important to gauge the depth of their market knowledge,” says Gray. “Ask them how well they know the local market. Do they know which streets and property types are best? Do they know the demographics? They have to have deep understanding of the local market you’re wanting to buy into.”
- Are you getting paid by the vendor or developer for recommending this property to me?
- Can you guarantee that you’ll disclose any payments you get by recommending specific properties?
This is a big deal when choosing a buyer’s agent. You want to work with someone who’s working solely for you and not receiving commission from someone else. If you’re paying someone to help you find a property, they can’t legally take payment from someone else. Therefore, if you’re not paying for a buyer’s agent’s service, they’re being remunerated by someone else, very likely by the vendor. Gray explains that it’s false economy to think you’re saving money by engaging someone who offers ‘free’ service but you end up buying a poor performing property, or worse – an overpriced, poor performing property. “Because you’re not paying for someone to do independent research for you, you could be offered a property that’s overpriced and unsuitable,” says Gray. “Buyer’s agents who don’t charge a fee are generally selling brand new properties where developers would pay them anywhere from 2–10% of the property price. “The developers then factor this into the price. So, say the developer built it for $400,000 and he needed to make a 25% profit, then he needs to sell it for $500,000. Since he also needs to pay the agent’s commission, he has to add this to the selling price as well. So the price you end up paying as the buyer becomes $550,000. “Compare this with engaging a full service buyer’s agent that you pay $20,000 to go and buy you a $500,000 property. Because your independent buyer’s agent is not limited to what property he can recommend, you’re likely to buy a better property and may end up paying less too,” explains Gray.
You want to deal with someone who you can trust to do the right thing for you. A quick way to gauge this is to go to the Office of Fair Trading in your specific state and see if the agent has been investigated for any wrongdoing. You can also do a quick Google search by typing the name of the agent and add ‘review’ to the search. “If there’s been any bad press or any judgement about these agents, then you’d find it online. You can also do a licence check and see if there’s been any judgements against them,” says Rich Harvey, managing director with Property Buyer
What to do next?
There’s no question that navigating the property market is daunting if you’re starting out. But just like with everything, it gets easier the more you do it.
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