They can score you access to off-market properties and even do the bidding for you, but they cost a pretty penny. Are they worth it?
With two kids aged seven and two, dogs and busy jobs, finding the best property to relocate to is not a simple matter for Sydney couple Harrison Dell and Brodie Johnson.
The family, who live in North Ryde, want to move to Brisbane by the end of August.
“Our landlord is selling our property due to mortgage stress,” says Dell, 30.
While the landlord offered to sell them their North Ryde rental at a discount, it was still going to cost around $3 million. “We just can’t afford that when in Brisbane, the houses are sub-$1 million, and of a high quality.”
Harrison Dell and Brodie Johnson, with their children, Piper, 2, and Oliver, 7, have bought a home in Brisbane, because of the cheaper prices.
To pick up their $925,000 five-bedder property in Ferny Hills, they used a buyer’s agent. It is costing them around $25,125 – a combination of the $2000 set fee and the 2.5 per cent commission – but the couple reckons they’ll still come out ahead.
“If you factor in the fact that you have to travel, and the knowledge [that the buyer’s agent] shared, it makes sense. It may end up being around $25,000, but we would have overpaid for the property, plus travelled more and been more stressed,” Dell says.
Vince Mangioni, associate professor in property economics and development at the University of Technology Sydney, says that as competition to purchase homes heats up in capital cities such as Sydney and Melbourne, more buyers will use agents just to increase their chances.
“The evolution of the buyer’s agent has come out of cities like New York, LA, London and Paris, where demand well and truly outstripped supply,” he says.
“These professionals command commissions that are almost as high as the selling agents because the greater task is in the purchasing, not the selling. The property sells itself to the highest bidder – the real skill set is being able to have the buyer in the position to have a fighting chance.”
But, he adds, buyers who choose to hire an agent should be aware that, given the commission nature of their payments, they’re relying on the ethics of their agent not to artificially inflate the buying price.
Here’s what to know about hiring a buyer’s agent.
What does a buyer’s agent cost? Lauren Jones is a Brisbane-based buyer’s agent who represented Dell and his partner.
She says most buyer’s agents will charge an upfront engagement fee and, once a property is purchased, a second commission-based fee.
She charges $2000 upfront, and a 2.5 per cent commission on the purchase price. Fellow buyer’s agent Luis Lequerica of Sydney firm LN Property Buyers charges an upfront fee of $2000, plus a commission of 2 per cent plus GST.
However, that percentage fee can often change into a fixed fee once a certain threshold is reached. For example, if Jones were to secure a property of $1 million or more, it would attract a fixed fee of $25,000.
What does a buyer’s agent do? “In the way that a selling agent represents the seller, we represent the buyer to level the playing field,” Jones says.
That includes sourcing the property and making recommendations on where to buy and completing due diligence. She gives the example of checking for flooding risk in Brisbane.
Buyer’s agents also often have access to properties that haven’t yet been listed.
They then also handle the engagements with the real estate agent, and may bid on properties for you at auction.
“I think part of my business is bringing the network to the client,” Jones says. “I’ll put them in touch with the best solicitors and the best building and pest inspectors, I’ll organise quotes.”
Lequerica adds that he invariably recommends his clients get an independent property valuation – when an agent is paid a commission based on the sale price, you want to be sure that they’re not taking you for a ride.
What are you signing up for when you use a buyer’s agent? Once you’ve signed on the dotted line, the buyer’s agent will source appropriate properties for you, based on the period of engagement they’ve been hired for and the area where the buyer is searching.
If the buyer chooses to purchase one of those properties, the agent is entitled to the commission.
“It’s really important that you read the agreement you’re signing,” Jones says.
“With all of my clients, I make it clear that … if they were to purchase without me, while under the agreement, technically the fees are still due.”
She says it’s also important to understand what’s needed to get out of an agreement; she needs seven days’ notice. But if a client were to cancel the agreement and then buy a property that had been recommended to them, they would still be up for the fee.
Critically, if a buyer chooses to purchase a property within the geographical area of engagement – even if the agent didn’t present them with the property – they’re also liable to pay the commission.
“What I ask my clients to do is that if they find something online that I haven’t presented to them, send it to me, because there’s a good chance that we’ve already ruled the property out for a particular reason.
“And even if it was a property that did suit them, there’s a much better chance that someone like myself would be able to get a better price for them.”
Who benefits the most? Lequerica and Jones agree that using a buyer’s agent isn’t automatically the best choice for cash-strapped first-home buyers, or for those purchasing in an area they know well.
But it can suit buyers who are looking to purchase away from where they live, or – as Lequerica is increasingly seeing – downsizers who can’t check out dozens of open houses or navigate property websites and the sale process. Equally, time-poor buyers with a bit of extra cash could arguably come out ahead.
How do you pick a good one? The first step is to check that your agent holds a real estate licence.
Lequerica says buyers should look for agents with experience in the area, and years on the board. In short: don’t pick a buyer’s agent from Bondi if you’re looking to buy in Roseville.
Jones says buyers have to be careful of becoming agents’ “guinea pigs”.
“Do a bit of research on your buyer’s agent. There are a lot who do a course and who haven’t bought a property,” she says.
“One of the biggest issues in the buyer’s agent space is inexperienced agents who are charging a premium for the service as well.”
She describes it as an “emerging industry”, as buyers become more desperate to get in and agents see a lucrative opportunity.
Ideally, if you’ve engaged a junior agent, they should have at least 12 months experience working with a senior agent, she adds.
“Negotiation is also massive. A lot of buyer’s agents are known to overpay for properties because they’re paid commission. You need to make sure that this person is working for you, and you only,” she says.
This isn’t necessarily easy to do as there’s no registry of sales completed by buyer’s agents. But Jones suggests asking buyer’s agents for the actual addresses where they’ve purchased, and then getting in touch directly with those buyers.