If you’re thinking of buying a home, what better way than having someone who will look after your interests 100% of the time? Ever heard of a buyer’s agent or some would call a buyer’s advocate?
Having buyer’s agents is popular in the US and has gained ground in Australia. They work for the buyer to look for properties, check and assess them, and then negotiate with the seller (or seller’s agent) to complete the deal at the best possible price that suits the client’s budget.
It sounds appealing as it may seem, but such buyer’s agent’s services are certainly not free. The prices and fee structure differ per agent, and as a rough guide, it will generally cost between 2% to 3% of the property price plus GST (for example, $24,000 for an $800,000 home).
When Sydney’s houses sell well beyond $1 million, that adds up to a lot of cash. So, is it worth it? It is pretty pricey. Can a buyer’s agent do something that you cannot do yourself? Or is he just one player seeking to make money from the vast opportunities in a booming property market?
What is a buyer’s agent?
A buyer’s agent is also called a buyer’s advocate and works with clients purchasing investment properties and homes for residence. The agent is a licensed professional who does the following on their client’s behalf who intends to buy a property:
- Looks for and evaluates properties;
- Helps negotiate for the purchase of the property;
- Works in residential and commercial real estate.
What does a buyer’s agent do?
A buyer’s agent has responsibilities other than just searching for properties. One can hire a buyer’s agent for assistance in one specific service only, and not the total package.
How do we know if a buyer’s agent is licensed?
A buyer’s agent should complete specialised training to get qualification. It’s a requirement too that one is a holder of a real estate agent’s licence or have a Certificate of Registration and work under a licensed real estate agent’s supervision. Want to check? Do a licence check online or perhaps, call 13 32 20.
Who uses a buyer’s agent?
- Most busy (always on-the-go) professionals and those looking for an investment property appreciate and value professional service, so they tend to hire a buyer’s agent. As expected, they will save the buyers’ time in finding suitable properties and dealing with the listing agent if there’s one, as well as completing due diligence.
- People who value their privacy and want confidentiality usually ask the help of buyers’ agents. Discretion is essential for sensitive private and commercial sales, for instance, to high-profile buyers.
- Buyers moving to a specific location or country (as they’re not familiar yet) could engage the services of a buyer’s agent who knows the place well. The agent with a good network and information about the neighbourhood can have the buyer become acquainted with the new community faster.
- First-home buyers are less likely to invest in a buyer’s agent and services. But some of these first-home buyers get in touch with a buyer’s agent when they come to realise that they have very limited knowledge in real estate. The ideal buyer’s agent will help lessen your financial risks, and once they negotiate the sale price, they could potentially save you the cost of their fee.
What are the key responsibilities of a buyer’s agent?
Knowing accurately what their client is looking for
A buyer’s agent will sit down and discuss their preferences and needs with their client. Among them are: what is their desired location, how many bedrooms should it have, what type of house, what amenities do they need to be near with, and most significantly, how much they are willing to spend – their budget.
Searching for the suitable properties
The buyer’s agent will start the search for properties suitable to the buyer’s needs and wants based on all the criteria provided to him.
Most buyers’ agents have established relationships with real estate agents and the property market in general. Because of this, they sometimes get to view properties exclusively even before they hit the market, and even properties that are not advertisement at all. Exclusive viewing with no competition could result to a faster sale transaction when the client approves the property straight away.
Evaluating the properties
A buyer’s agent might look for more than a handful of properties, but he would hesitate to show the client a particular property if it doesn’t meet the criteria, of course. Buyers’ agents typically use their discretion and expertise to highlight the shortlisted properties only, which they believe match their client’s requirements.
Recommending inspections
They’ll be the ones to perform the due diligence for their clients and will recommend if a property needs a pest or building inspection. They will also suggest an inspection service to the client.
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Negotiating on the client’s behalf during a private sale
The buyer’s agent represents their client in negotiations when they’re interested in buying a property. The agent will try to get the best price and sale terms and conditions. But the advantage is that they also know when it’s best to withdraw from the negotiations when the deal is not going to work.
Bidding on the client’s behalf during a property auction
Property auctions can be both intimidating and overwhelming. It is so easy to let one’s emotions get in the way, that when speed and intensity are in full swing, one either ends up buying impulsively, or pulls out and leaves very disappointed.
At auctions, an experienced buyer’s agent will represent you and will make sure to stick to the set budget.
The other responsibilities a buyer’s agent may do are the following:
- Sorting documents and contracts for review of an appropriate professional;
- Assisting the client in getting access to the property before final settlement (if required);
- Representing the client during final inspection;
- Recommending mortgage brokers;
- Negotiating favourable settlement and deposit terms;
- Analysing latest sales data and giving an appraisal;
- Offering advice on leasing and property management to investors.
Know that one can always hire a buyer’s agent only for specific services (as long as the client will take care of the other activities needed to complete the process). To illustrate, a client may only ask them to provide a shortlist of the relevant properties, and then the client handles everything else. Or a client may just need a buyer’s agent to bid on his behalf at an auction.
Why should one hire a Buyer’s Agent?
There are several reasons to consider using a buyer’s agent if you plan to purchase a property. It’s not essential, but it can be beneficial for the following reasons:
It is an advantage to have an expert, first and foremost.
Investors may benefit from the buyer’s agent’s knowledge, time, and expertise. It is truly a relief to have an expert in property sales, knowing it’s flooded with confusing jargon. You can ask the agent any question or request for information about the property buying process in general and matters like contracts, settlements, government regulations, and more.
Someone can give you sound investment property advice.
Perhaps, one is interested in buying an investment property but not familiar with the market. A buyer’s agent is someone who can give sound advice on what type of property to buy to have both good rental income and capital growth in the future.
Buying a house is time-consuming, and one may have other priorities.
Purchasing a house can take much of one’s time, and if one is busy, this might not work out. A buyer’s agent is the answer as he can take care of the challenging work so the client can attend to his other priorities.
Buying a property becomes less stressful.
In a hot market, property hunting is both time-consuming and stressful. When the buyer has someone else do most of the legwork like a buyer’s agent, he can avoid undue pressures.
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It helps when one is new and unfamiliar with a city.
If one is moving to Sydney, for example, from interstate or overseas, likely, they wouldn’t know so much about the ideal suburbs that will suit their needs and what the property market is like. A buyer’s agent will come in handy since he has local knowledge and can provide guidance and help new residents secure properties.
One need not worry about attending auctions.
It is a good idea to get the services of a buyer’s agent if bidding at a property auction (even for a day only) is something a buyer doesn’t want to do. The buyer will be represented by the agent and he wouldn’t need to worry about the adrenaline pressure especially when the price gets uncomfortably high, plus the budget will remain the same.
One can have access to off-market properties.
A buyer’s agent could often be the best way to access private sales and off-market opportunities.
The buyer’s agent can get a better deal.
A buyer’s agent is a negotiation expert, so one probably gets a better price quicker. Great, right?
What Is Exclusive vs. Dual Representation?
An agent may be both a buyer’s agent and a listing agent, but in most cases– many agents have specialised in one versus the other side. For example, the “Exclusive buyer’s agents” are not doing the property listings at all. Instead, these agents only represent the home buyers and avoid potential conflict of interest with sellers.
There are still several agents who offer dual representation. A dual agent is one that represents both the buyer and a seller in the transaction.
Be cautious when an agent offers a house he is listing for a particular seller. The client might be getting into a dual representation set-up here. The agent will have to balance the seller’s interests with the client’s. The situation looks like the agent is walking into a courtroom but using the opposite side’s lawyer.
Everyone is eligible to have their representation, and there’s no reason you shouldn’t.
Should you use a buyer’s agent?
This decision is ultimately yours to make. Remember that buyers may have horror stories about buyers’ agents, but there are also several cases with tremendous success. It may help that one shuns the actual sharks out there and score the best Buyer’s Agent that they can get.
The best reminder is that the Buyer’s Agent is doing a service for YOU. One is paying him for a result, and these agents should understand the client and design the best property results possible.
The main thing is to understand if their financial incentives are aligned with your goals, which means that they are not getting kickbacks from real estate agents, builders, or anyone.
If they insist on their way and set aside the buyer’s circumstances, or maybe they tend to ask open-ended questions to know more about you, it’s time to walk away.
Are you getting along well with your buyer’s agent? This is also one consideration. Buying a property is indeed an emotional ride, and you should be comfortable asking hard questions to your agent.
Here are some good questions to ask to check if the Buyer’s Agent is a shark:
- Do real estate agents pay you for buying their properties, or do you get referral fees from them (it must be a YES or NO answer).
- If you have been personally investing in property, how many years have you been into it? What type of properties do you own? (Do these fit well with the strategy you’re aiming for?)
- How many purchases have you made so far? How many clients have you bought properties as an agent? (If they do not tell the exact number, ask for a ballpark figure)
- Are you an exclusive buyer’s agent? Or, do you work for a project management group? (This can be a leading question to establish if this buyer is one who also sells properties and could be just passing some trash stocks to you. Or if the agent works in a real estate sales office, that could be a conflict of interest).
- What’s the easiest and fastest way we can communicate?
- What’s your pricing structure? Is it fixed? How are you getting paid?
- What other kickbacks do you get from brokers and other real estate professionals?
- How long did the process take from initial activities to sales for your most recent 2-4 clients?
- Will there be a discount on your fee? (This is more to help you determine how the agent negotiates if he’ll be happy to lower prices for their own business. Or would you want someone who gives up so quickly while dealing with you?).
- Why should I hire your service instead of another? (Check their presence of mind and how they handle themselves with hard questions).
Consider looking elsewhere if you are not happy with how they answered all these questions.
Are the buyer’s agent’s fees tax-deductible?
Purchasing expenses, including buyer’s agent’s fees, can form a portion of the cost base when buying an investment property, thus, reducing the capital gains tax an investor pays when he sells the property in the future.
On the other hand, owner-occupiers cannot claim a tax deduction for any buyer’s agent’s fees.
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