There are more buyers than properties, so don’t expect a great deal from a buyer’s agent.
ANALYSIS
Buying a property is hard at the moment.
There are far more buyers than there are homes to go around.
So, if you were an agent looking to make a commission, why would you restrict yourself to the relatively small pool of people selling a house, when you could dive into the vast ocean of buyers?
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Recent years have seen an outbreak of buyer’s agents, swarming through the suburbs, trying to secure homes for their clients.
But are they worth it?
Some charge a flat fee for their services, usually about $10,000 to $15,000. But others charge a percentage of the purchase price, between 1 and 3 per cent in some cases. That’s on par with what a selling agent gets.
For a median priced house in Sydney, that could mean you are paying a buyer’s agent more than $40,000.
For that kind of money, I’d want a property that has been researched, secured at or below market value, and presented as a ready to sign deal.
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Unfortunately, that is rarely the experience that people have. Sometimes, a buyer’s agent may be able to show clients off-market properties that they wouldn’t have otherwise seen, but if demand is strong, the buyer may still miss out, or have to pay more than they wanted to.
Buying a home is not like buying a used car. You can’t haggle the price down with a selling agent if there are 50 other people trying to buy the same property.
Owner-occupier properties are often more in demand than investment properties.
And one would question how motivated a buyer’s agent would be to negotiate the lowest possible price if it meant they would earn less commission.
Once you realise there are no guarantees, you can think about what a buyer’s agent can offer you and what you are happy to pay them to do so.
Buyer’s agents can, for instance, be particularly helpful when it comes to finding an investment property in another state.
I have used a buyer’s agent twice, to purchase investment apartments in Queensland and Western Australia.
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The agent was someone with many of his own investment properties and who had been researching those local markets extensively. He had a track record of buying many properties for his clients in those areas. Both my investment properties were presented to me as ready for me to sign, for below market value, with tenants in place.
On those occasions, the market for apartments in those locations were underperforming, but there was still a high demand from renters needing a place to live.
In those markets, selling agents will often go directly to a buyer’s agent they know who will buy at a certain price point, without having to officially list the property and go through a whole marketing campaign, for only a slightly higher sales price, or no sale at all.
It is much harder for a buyer’s agent to negotiate a great deal on an owner-occupier home, in a sought after suburb, with strong competition from other buyers.
At the end of the day, you’ll end up paying market price for the home and then paying a buyer’s agent on top of that.
A sought after home and location will mean plenty of competition. Picture: Rohan Kelly
In those scenarios, you can save the money and set about turning selling agents into your own unofficial buyer’s agents, for free.
You can do that by calling every real estate agent that is selling in the area you want to live, letting them know you are a motivated buyer, with finance ready to go and ask to be put on their database.
Most will then contact you with every property they have coming to market, because it’s their job to drum up buyer interest. You are then basically on equal footing with any buyer’s agents in the area, with just as much chance to score a home for the price you want to pay.
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