If you’ve ever bought a property you’ll know it can be a bit of an emotional rollercoaster.
Hours spent searching, days lost to viewings and waiting on the edge of your seat to hear back on an offer. Not to mention attending an auction where even the opening bid was beyond your budget.
Or perhaps you’re buying interstate, or in a market you don’t know, and just don’t know where to begin?
These are all circumstances where you might consider using a buyer’s agent.
How can they help?
While selling agents may appear happy to help you find a property, it’s important to remember they represent the seller and their legal obligation is to seek the best outcome, price, terms and conditions for their client.
By comparison, a buyer’s agent’s obligation is to the buyer. Here’s how they can help.
- They can be especially useful if you’re time-poor, buying in an unfamiliar area or are struggling to find what you’re looking for within a certain budget.
- They take the emotion out of property buying, ensuring the price you pay is fair rather than fanciful.
- Many are former real estate agents so they know the property business and maintain close ties to selling agents, which gives them access to off-market properties. They can often glean more insights into the seller’s circumstances and the price they may be willing to accept.
- Selling agents like dealing with them because they know they represent serious buyers.
- For investors, they usually have expert knowledge in up-and-coming locations for capital growth and rental yields, and many also offer bolt-on services such as property management and leasing.
But remember, they aren’t mortgage brokers or financial advisers, and can’t organise your home loan or give you debt advice. Their expertise is solely in the value of property, and in negotiating its purchase.
What are the pitfalls?
- Some buyer’s agents claim they essentially cover the cost of their services by securing a lower purchase price than you could achieve alone, but there is no guarantee this will be the case.
- If your purchasing budget is tight, forking out extra money for a buyer’s agent services might not be worth it.
- It can be expensive, as if you’re selling as well as buying, you’ll also be paying the selling agent’s fees of around 2.5%1.
- It doesn’t mean you can outsource your property purchase entirely. For the best results, you still need to be involved in setting your budget, determining and communicating your requirements, and ensuring you’re happy with the property and the price.
What services do they offer?
Most buyers’ agents offer a full service search, which involves:
- finding suitable properties, both on and off market
- inspecting properties on your behalf to develop a shortlist
- accompanying you to viewings
- evaluating properties against recent sales data
- providing a written appraisal of a property’s value
- arranging building and pest inspections, surveys and engineering reports
- negotiating the purchase price and terms
- bidding at auction
- overseeing contracts and exchange
- conducting or organising pre-settlement inspections
- overseeing settlement2
But you can also employ a buyer’s agent to undertake just one or two aspects of a property purchase, such as bidding at auction, negotiating the price or providing a valuation.3
How much do they cost?
The cost varies but, as a guide, they typically charge around 1.5-2% of the purchase price, plus GST.4
Some agents may offer a fixed fee instead, which can be more beneficial for the buyer, as earning a percentage of the purchase price may give the agent less incentive to negotiate the lowest price possible on your behalf.
For negotiation only, fees are typically around 1% of the purchase price, plus GST, or an agreed fixed fee. While it’s likely to be around $500 to employ them to bid for you at an auction and potentially an additional fee if they’re successful.5
Overall, fees tend to vary depending on the property price bracket, the difficulty of the search and the area you’re buying in. You should expect to pay some of the fee upfront to cover the agent for time spent on your search in the event that you don’t buy a property.
How to choose an agent
If you’ve decided a buyer’s agent could help you, look out for the following:
- Find one that specialises in the type of property you’re after and in the area you want to buy in.
- Look for someone who’s a good fit with you and communicates well.
- Seek recommendations from family, friends or colleagues.
- Get quotes from several different agents.
- Ask whether they act as selling agents or property developers to ensure they are acting in your best interest.
- Membership of an industry body, such as the Real Estate Buyers Agents Association of Australia, also provides additional peace of mind.
How AMP can help
For more information about getting your finances in shape for a property purchase, speak to your financial adviser or if you don’t have one, call us on 131 267 or find an adviser today.
Want to win an iPhone 7?
Subscribe to News&insights before 31 March 2017 to be in the draw.
There's a lot to consider when buying an investment property or home, especially for the first time.