How does a buyers agency work?
A buyers agency might be just what you need if you’re trying to buy a property within a short period of time and want to avoid stress.
The property industry knowledge and negotiation skills they have can give investors, and buyers in general, an edge in a competitive real estate market.
Investors or a high income earners can get a lot of value out of a buyers agency but are they for everyone?
In basic terms, a buyers agency employs agents that work on behalf of buyers to buy a property.
Buyers agents or advocates can provide you a shortlist of properties to choose from based on their knowledge of the local market, how much you’re willing to spend and your capital growth expectations.
What steps do they take?
After they get an understanding of where you’re looking to buy, the type of property you’re after and how much you’re willing to spend, a buyers agent will typically present you with a brief of the location based on market data.
This data may come from research houses like CoreLogic and Australian Property Monitors and show the average price of the property type you want to buy and what the capital growth potential is for the location.
The beauty of a buyers agency is that once you’re firmly set on location and the type of property, the buyers agency will likely already have some properties on a short list for you.
Right away, you’ve already saved time and the possibility of missing out on the property of your dreams!
Depending on the size of the buyers agency, you will be placed with a buyers agent that specialises in a certain location or postcode.
If you’re buying multiple properties, you may even get a team but just be aware that this may cost you more upfront.
These agents will already have relationships with vendors and real estate agents that they’ve dealt with in the past.
Although it sounds like a conflict of interest, these real estate agents and their clients are often after a quick sale or in a location considered to be a buyers market.
Sellers are often quick to take advantage of unskilled buyers but a buyers agency will already have an idea of what the market value of the property is.
As the agent shortlists properties, go with them to the open houses and get an understanding of how they reach their market value figures. You may learn something.
Pretty quickly, the agent can tell whether the vendor is asking way too much for the property based things like location, the condition of the property and the size of the land and building.
Keep in mind that the bank’s valuation is totally different to the market value of a property.
Who uses a buyers agency?
Professional property investors or those wanting to buy multiple properties at once often use the services of a buyers agency.
That’s because they already have a significant portfolio to manage and they just don’t have the geographical reach to handle all of the transactions.
Luxury or high-end property buyers
These people are typically looking for a luxury home for themselves and their family.
They tend to be high income earners and work long and strange hours that prevent them from getting out there and finding a property themselves.
Because buyers agents have access to unlisted sales from private vendors, big spenders can often snap up a home that the general public doesn’t even know about.
People looking to take advantage of an interstate property play sometimes don’t have the ability to travel to check out the property.
A buyers agency located in the area can source the property for you, negotiate with the seller and come back to you with a price without you having to leave your home.
Many overseas investors prefer to purchase properties in another country, sight unseen.
Commercial property investors
Some buyers agencies have their own commercial specialists that can help mum and dad commercial investors buy their first shop, pub or cafe.
They understand how to analyse the financials of the business you want to buy and negotiate on price.
In that way, you can make an informed decision on whether to go ahead with the transaction.
Check out the commercial property loan page to discover how we can help you get finance for a number of different commercial property types.
Call us on 1300 889 743 or complete our online enquiry form if you’re looking to buy an investment property.
Who doesn’t use a buyers agency?
First home buyers or low deposit holders borrowing up to 90–95% of the property value don’t tend to employ the services of a buyers agency because it’s an extra cost that they just don’t have on hand.
It may also be a risky expense when you’re just starting to make home loan repayments to be having to pay such a large expense.
Also, consider whether these funds are coming out of your deposit or not.
Can you be confident that the agent can get enough of the purchase price to warrant the buyers agency fee?
How do they make the settlement process easier?
Since you should already be pre-approved for a home loan, a buyers agency can help you avoid having your conditional approval lapse before finding a home.
To explain, pre-approvals generally expire after 3 to 6 months.
If you find a property after your pre-approval expires, you will have to re-apply for a home loan and your pre-approval could potentially wait another 4-5 days for the bank to get back to you.
Even with a bank that offer next day approval, you could already be missing out on your dream home.
In fact, a buyers agent can typically source a property and have the sale finalised 7 weeks sooner than if you were to go about it yourself.
This is specifically for families or couples looking to buy their dream home.
For investment properties though, it could take you as little as 2 to 3 weeks from the buyers agency sourcing a property to you signing the contract of sale.
Throughout the process, the buyers agent will be in touch with your mortgage broker and solicitor to let them know what stage of the buying process you’re at.
This will help to ensure a smooth transition of the vendor receiving the deposit and the signing of contracts.
Ultimately, you can reach settlement faster and get into your home a lot sooner.
What are the benefits?
Find a property a lot faster
Choosing the property that’s right for you takes a lot of time, something most people just don’t have because of work and family commitments.
Even if you’re able to put in some time to look at properties, you’re never going to have enough time as a buyers agency.
You’ll also be wasting your efforts on attending open houses for a property that doesn’t quite fit your criteria.
This means that you’re more likely to make a half-hearted decision on a property and location that you really should know more about.
This includes considering past sales results and market factors that would impact future values.
Yes, there are resources and tools online, but outsourcing this to someone else may be worth the cost if you can potentially save more on the purchase price than with own efforts.
A buyers agency can literally call you up and let you know that you should be moving quickly on a property before it’s snapped up or the price goes up rapidly.
The great saying of a “time in” market doesn’t really apply when you’re trying to land yourself a great piece of real estate: timing is everything.
They look at your needs and goals objectively
Whether you’re buying an owner occupied property or an investment property, sometimes what you want isn’t necessarily what you need.
Although it’s recommended that you seek financial advice as well, a buyers agency can help you work out your short term and long term goals.
They do this by asking crucial questions that you probably haven’t considered.
They will also give you a good picture of the location you’re looking at and what you can expect in terms of return on investment (ROI).
Access to unlisted properties
A buyers agency has access to private sales as well as the properties that are available for sale to public.
These properties aren’t listed because the vendors have good relationships with the buyers agency.
They’d rather deal with an agent for a quick sale than go through the process of spending money and time on a real estate listing.
You’re beating others to the sale
By coming in with a hard bargain that’s backed-up with good market knowledge, a buyers agent can quickly make a deal with a vendor rather than you having to go back and forth with them over days or even weeks.
The worst thing you can do is waste a vendor’s time, which is difficult if you’re working full time or have other commitments.
A buyers agent can stop other potential buyers from beating you to a great buy.
Are you living in Brisbane and want to buy a property in Fitzroy?
With a buyers agency, you can leverage their knowledge and skills to buy a property interstate: you don’t even have to be there!
Unlike simply buying an owner occupied property based on your desires, a buyers agency can help you source properties that are right from a capital growth perspective.
It could be that property is a unit instead of a house or in a neighbouring suburb rather than the location you decided on.
That’s because they have a good knowledge of capital growth opportunities across a number of different locations.
Negotiation and auction skills
A buyers agency knows when to go in hard in negotiations and when a light touch is needed.
Everyday people just don’t have these skills especially when they’re buying from a seasoned property investor.
Vendors who are selling their investment property will always drive a hard bargain but a professional knows how to build a strong case for what they believe is a fairer price for the property.
They’re also emotionally-detached and will represent you objectively in an environment where emotions can run high.
What are the negatives?
Is it really worth it?
Sure, you’re saving time and effort but bear in mind that in a seller’s market, vendors and real estate agents are unlikely to move much on price if they have ten other potential buyers lined up.
This is particularly true in “hot” locations where there are more buyers than houses for sale.
A buyers agency is generally only for people who have some knowledge of the potential market value of similar properties in the location.
Otherwise, you could potentially be paying a fee for little savings on the purchase price.
You have to really be questioning what the buyers agency is proposing to do in terms of the sale or when sourcing a property in the first place.
Remember: they’re acting your behalf and helping you through the process but you ultimately have to run the show.
Some buyers advocates can be unethical
Beware of a buyers agency that charges an engagement fee for a consultation or an excessive full service rate.
Some buyers agents don’t charge an engagement fee at all!
Also, ask them for their experience and testimonials, whether they’re licenced real estate agents and whether they’re a member of an association like the Real Estate Buyers Agents Association of Australia (REBAA).
Some buyers agents earn commission from vendors or developers, which isn’t illegal in itself but should put question marks over their objectiveness.
You have to move pretty quickly
If you haven’t used a buyers agency before, you should be aware that their agents are trained to move quickly on transactions.
This is generally the point of using an advocate but it can make some buyers feel rushed into a sale.
In saying that, it’s something you’d have to deal in the “real world” or without the help of a buyers agency.
Never rush yourself into a purchase and seek out independent financial advice if need be.
Be wary of groups that spread themselves too thin
You may come across a group that claims to be experts in every major capital city in Australia, for instance.
The reality is that most buyers agencies are one or two man shows meaning they really have no area of specific expertise at all.
They often make these claims to get as many deals as possible.
Find out how many agents they have and whether they have an agent that specialises in your location.
How to choose a buyers agency
With so many buyers agents operating in Australia, choosing the right one can be tough.
Ensuring they’re a member of REBAA is a good start.
The REBAA is the peak body in Australia for buyers agents and they work to maintain professional standards in the buyers agency industry.
According to the Real Estate Institute of NSW, all buyers’ agents must hold a real estate agent’s licence.
However, they can request this to be limited so that they can only carry out buying functions.
Ask the buyers advocate if they’re licenced to sell as well: this may tell you that they’re not operating in your best interests.
Buyers agency FAQs
Deciding to use a buyers agency is a big decision when buying an investment property or even trying to find the property of your dreams.
Here are some more facts about buyers agencies that you probably didn’t know.
How does a buyers agency get paid?
For standard owner occupied or investment properties, most buyers agents charge a flat rate for their service.
The industry standard is typically 1.5 to 3 per cent of the purchase price.
So for a home being sold for $800,000 in Melbourne, you could be paying around $12,000 to $24,000.
That may sound like a lot upfront but if they can save you upwards of $100,000 on the purchase price, then it may be worth it.
Let’s say you had an $80,000 deposit saved for the property: your Loan to Value Ratio (LVR) would have been 90%, not including the cost of completing the purchase such as conveyancing fees, stamp duty and other legal costs.
By potentially saving $88,000 off the purchase price (minus the buyers agency fee), your LVR would be under 90% LVR meaning you could be eligible for interest rate discounts and waived Lenders Mortgage Insurance (LMI) depending on your profession or if you earn more than $150,000 per annum.
A good buyers agency also receives no commissions from real estate agents or vendors.
On top of that, some charge an engagement fee just for a consultation while others don’t.
It’s always important to ask for their fee structure and whether you can get a discount because you were referred by a friend or a financial professional like your mortgage broker.
What if I cannot afford the buyer’s agent fee right now?
There are a few buyers’ agents which allow a 12 month payment plan to pay the buyer’s agent fee.
You will need to pay a flat sign-on fee of about $1,500 (inclusive of GST). This initial sign-on fee includes the cost of:
- The agent’s time and expertise
- One strata/building report
- One pest and building report
- A contract review before you sign the contract
- Success fee (which varies according to the final property purchase price)
Once the buyer’s agent has successfully located, assessed and negotiated an ideal property, you will start making 12 equal and monthly payments upon the unconditional exchange of contract.
As you don’t have to pay the buyer’s agent fee upfront and pay it in instalments, you get to move into your property faster.
Should I get financial advice?
It may be worth getting financial advice from an independent like an account or a financial adviser as to whether you can afford a buyers agent.
The last thing you want to do is to put yourself in financial hardship.
Can they bid at auction for you?
Auctions can be stressful no matter whether you’re a first time buy or a seasoned investor.
If you don’t have an idea of the market value for a particular property, you could easily be paying way more for a property that you should have.
It’s even tougher if you live overseas or you live interstate: you just don’t have the knowledge of the area to set yourself a reasonable bidding limit.
A buyers agency can do all of this for you and usually at a lower fee than a full service offering if you just need an agent for an auction.
Can a buyers agency help me buy multiple properties?
Finding a buyers agency with a large team of professionals is crucial if you want to rapidly grow your portfolio with real estate from several different locations.
Some buyers agencies even provide coaching and can act as your “investment partner”, along with a good mortgage broker, for the long term.
When investing, it always helps to build strong relationships.
Is using a buyers advocate tax deductible?
In some cases, you may be able to claim the cost of a buyers agency as a tax deduction if you’re buying an investment property.
It’s essential you speak to your accountant about tax-related matters though.
Where can I find a buyers agency?
Most people source a buyers agency through their friends, family and work colleagues.
Like seeking help from any financial professional, finding someone you can trust is key.
Find out if anyone you know has ever used a buyers agent in the area you’re looking to buy.
Your mortgage broker may also have a buyers agency they can put you in touch with such as Providence Property, a team of property insights experts and buyers’ agents located in Sydney, Melbourne, Perth and Brisbane.
Do you need a home loan?
As mortgage brokers, we can’t assist you with buying a property but we can help you get approved for a home loan.
If you need a home loan to make your property ownership dreams a reality, call us on 1300 889 743 or complete our free assessment form today to speak with a mortgage broker.