Will the REAL buyer’s agent please stand up!

Buyer’s agents have come a long way since the days when only the monied investors employed them to source their property deals. Nowadays, they’re as ubiquitous as Uber and for good reason. Good buyer’s agents can help you get a great property deal even before it comes on the market. Having a buyer’s agent on your side is particularly helpful in the current market where properties are selling fast. Unfortunately, for an industry that’s already suffering from negative stereotypes such as ‘sharks’, ‘scammers’ or ‘dodgy’ operators, it continues to attract unsavoury characters. Which means that just like other experts in this industry, there are good and honest operators and there are those that you simply need to avoid. So, how do you know you can trust your buyer’s agent to do the right thing for you? It starts by understanding the different types of operators in this space and how they work.

Buyer’s agents: Who should you choose?

Full-service buyer’s agents

These are buyer’s agents who offer full-service from start to finish. They source the property based on your requirements and will help you through settlement.
Pros
  • They offer tailor-made service for you, from sourcing the property all the way through  settlement
  • They handle all aspects of the property buying process such as researching the market based on your criteria, negotiating the price and securing the property
  • They help you prepare the paperwork and even help you organise the experts that you need such as lawyers, accountants or brokers
  • They save you time as you’re only presented with fully-vetted property options
  • They have access to property valuers and to any properties listed for sale
Cons
  • Their fees can be prohibitively expensive. They charge either a fixed fee of around $15,000 per property or a percentage of the property price, which can range from 1.5% to 3%
Selling point
  • They position themselves as offering the most comprehensive service to the buyer
  • They are generally well-connected and highly regarded in the industry
  • They generally have good track records and lots of experience
  • They are accredited by the industry bodies
What you need to know
  • When you enlist their services, you’re tied up. This means that if you pull out, generally, you have to pay a certain percentage of their fees, which can still be hefty
  • If you find a property on your own while using their service, they can still charge you the full fee for finding that property
  • You still need to do your due diligence on the property presented even if they’ve been researched. Only you know what works for you
Miriam Sandkuhler, buyer advocate and author of Property Prosperity argues that real buyer's agents spend a lot of time and energy sourcing the property for the buyers hence the fee involved. "We go through the analysis and then the buying process. Sometimes we miss out at an auction. And all of that work resulted in nothing. I have to do it all again. I'm doing it three to four times for the same fee. If I work with a client for six months and they refuse to buy for whatever reason and then they go and deal with a selling agent or vendor directly, why shouldn’t I be paid for using my time, money and effort? Remember free advice is never free – you may pay at some point down the track. You may ‘pay’ by losing out on thousands of dollars of capital growth over time or by not being able to easily resell the property down the track," says Sandkuhler.

Property buyer’s group

These property buyers operate differently to the full-service buyer’s agency in that they usually get a deal going and then offer their clients a chance to buy into it at a discount. Unlike the full-service agency where they go and search the property based on your requirements, the property buyer’s group offers you the opportunity to buy into a property deal that they’ve already negotiated. They call themselves buyer’s agents, but they’re technically just property marketers according to Zoran Solano, senior buyer's agents with Hot Property Buyers Agency.
Pros
  • Ability to buy wholesale. You’re leveraging the property buyer’s ability to negotiate a deal that is often off-market and exclusive to them
  • Access to properties that are not available to the public
  • Generally charge lower fees (about 10–20% lower than full-service buyer’s agents)
  • Access to all the reports and experts, just like the full-service buyer’s agents
Cons
  • You’re limited to the property that’s being offered to you
  • You’re relying on the property buyer’s ability to negotiate and assess the property’s potential
  • You’re buying with other investors, potentially increasing competition
  • You might get pressured into making a quick decision. As these buyer’s agents have to move fast, you may not get enough time to do your own due diligence
  • The property may not be suitable for your situation and your goals
Selling point
  • They are cheaper than the full-service buyer’s agents
  • They have buying power, so they can buy wholesale
What you need to know
  • These agents go and source deals using their own criteria. They’re not generally tailored to your situation and goals
  • They may be targeting areas that are speculative or don’t have growth drivers
  • You may be asked to sign a contract quickly to guarantee a piece of the deal. As such, you may not have enough time to do your due diligence
  • Every now and then, you get offered properties that may look great on paper because of the negotiated lower price, however, lenders might not necessarily lend against it because of its location or the perceived risks
  • Generally, you need to pay them a non-refundable fee (around $1,000) to become a member of their group

Free service

These agents claim to give you free service for finding an investment property. However, they do charge homebuyers.
Pros
  • You get ‘free’ advice and service
Cons
  • It’s difficult to establish whether you’re getting independent advice on a property deal because you’re not paying them
  • They may have limited access to properties on the market if they’re splitting their commission with the selling agents
Selling points
  • They offer free service
What you need to know
  • Because you’re not paying for a service that generally attracts tens of thousands of dollars, you’re taking a leap of faith that you’re going to get independent advice and buy a solid property
  • When you’re not paying for a service, it’s generally because someone else is paying for it. As such, you may be offered a property that’s not suitable for you or worse, a substandard property that won’t grow in value

Property promoters

Property promoters are essentially marketing companies working for property developers. They generally have large stock of developments on their books for buyers to choose from. Their services are free to buyers because they get paid commission by the developers.
Pros
  • Access to a large number of developments
  • Free service to buyers
  • They’re generally transparent about the commissions they get from the developers
Cons
  • Because they’re paid for by the developers, they’re only able to offer you the property stock they have on their books
  • Mostly off-the-plan and new developments
  • They’re motivated by sales and less on the buyer’s needs
Selling point
  • They have access to an extensive array of property developments
  • Free service to buyers
What you need to know
  • Because these agents get high commission from the developers, they may try to sell you an unsuitable property for your situation and needs
  • You are limited to new properties or off-the-plan developments
  • The research they give you may not be independent

Beware: Are you dealing with a real buyer’s agent?

Broadly speaking, anyone who’s dealing with a buyer is a buyer’s agent. However, a buyer’s agent as defined by REBAA is anyone who’s working solely for the buyer. They get paid for their services by the buyer. They don’t get remuneration or commission from someone else. Their focus is to source the best property for the buyer based on their requirements. A selling agent can’t be a buyer’s agent because they work for the vendor. As such, their goal is to get the highest price for the property. As buyers, you can’t rely on them to give you unbiased information as they’re legally bound to get the best results for their client, which is the seller. A property buyer’s agency that claims to work solely for the buyer but is paid by the selling agent, vendor or developers is not considered a buyer’s agent, according to Rich Harvey, president of REBAA and managing director with Property Buyer. “Calling yourself an independent ‘buyer’s agent’ while selling property is simply dressing up the wolf in sheep’s clothing,” says Harvey. “True buyer’s agents have a fiduciary duty by law to act in the best interests of their clients and this is legislated in each individual state’s real estate law.”

What service can you expect from a good buyer’s agent?

A good buyer’s agent is worth their weight in gold. Here are just some of the services you can expect to get:
  • Sits with you to understand your investment goals
  • Helps you create a realistic buyer’s brief based on your goals and financial capacity
  • Gives you comprehensive research analysis and comparable sales data
  • Extensively researches the market that matches your requirements
  • Shortlists properties for you to consider, highlighting both the positives and negatives of each option
  • Gives you advice on property prices in the area you’re interested in
  • Negotiates the lowest possible price for your chosen property
  • Negotiates the best terms in the contract such as the amount of deposit needed upfront, access to the property prior to settlement and so on
  • Works exclusively to help you get the best property at the best price
  • Rejects kickbacks or commissions from the vendor
  • Refers other professionals such as solicitors, property managers or brokers if you need them
  • Always keeps your information confidential
  • Maintains regular and honest communication with you
  • Helps you throughout the buying process

 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.
Getting educated is the first step.
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