What Is A Buyers Agent? (Ep291)
What is a buyer’s agent and what do they do? A buyer’s agent specialises in helping buyers find, evaluate and negotiate the purchase of a property.
What is a buyer’s agent and what do they do? And should you hire one?
Hey, I am Ryan from onproperty.com.au, helping you find positive cash flow properties. Today we are talking about what it is exactly that buyer’s agents do, how much they cost and should you hire a buyer’s agent yourself.
So a buyer’s agent is a licensed professional who specializes in researching and finding and then evaluating and then negotiating the purchase of a property for you. That could be a property that you live in, that could be a home – your principal place of residence or that could be a property that you are using as an investment. So a buyer’s agent is mostly someone who you employ to go into all of the hunting and all of the research for you and they often call it armchair investing.
So you sit in your armchair, you are paying a buyer’s agent to go out and to find the deals. You are paying them to research those deals to discover is this a good property to buy? Is this a good area to invest in? And then you are also hiring them to negotiate on your behalf, to help you lockdown and purchase a property.
So that is what a buyer’s agent is, that is what a buyer’s agent does. Buyer’s agents also can perform bidding for you at auctions that is generally an extra cost that they have. And buyer’s agents do not sell real estate. They do not sell real estate, they act on your behalf to help you purchase real estate. That is different from a general real estate agent who is paid by the owner of the property who is selling it.
They are generally paid on a commission on the sale price of that property. The buyer’s agent is not paid by the owner, they are not involved in the selling of the property, they are just helping you to find, research and purchase your own property. So they work on the buyer’s side that is why they are called buyer’s agents whereas real estate agents work on the owner’s side or the vendor’s side to help sell the property. They generally do not get commission from the sale of the property as well however there are some cases where buyer’s agents make their fees or make their commissions from developers or builders for the sale of the property even though it would not be disclosed as that.
It will be disclosed as marketing fees or it will be disclosed as project management or it could be disclosed as a myriad of things but buyer’s agents are generally paid by you the buyer. And they generally do not get a commission from the sale of the property however in some cases especially when you will be buying new build properties, that may not be the case so you have to consider that.
How much do buyer’s agents cost? Let us cover this off. Buyer’s agents generally charge between 1% to 3% of the purchase price of the property. This is generally payable upon when the contract goes unconditional on the property. So 1% to 3% but generally around that 2% mark is what a standard buyer’s agent will charge. To give you quantifiable numbers, this means if you are investing in a property worth $500,000, 1% would be $5,000, 2% – which is the norm would be around $10,000 and then 3% would be $15,000. And if you are purchasing a property worth a million dollars, then 2% is going to be $20,000, 1% is going to be $10,000 and 3% is going to be $30,000. So you can see what price they have there.
There are buyer’s agents as well who charge fix fees rather than a percentage of the cost and these generally range between $5,000 to $15,000. It is more common for it to be around the $5,000 to the $12,000 mark depending on the buyer’s agent. The less expensive the property, the less complex the deal, the more likely you are going to get around that $5,000, $6,000, $7,000 mark. The more complex the deal, the more expensive the deal and the more effort that goes into it, you are going to look more in the $10,000 plus in order to hire buyer’s agents for that. So if you are looking to hiring buyer’s agents, that is how much buyer’s agents are very likely to charge.
But do you need a buyer’s agent? You know what a buyer’s agent is, you know what a buyer’s agent does, and you know how much they make. Do you need one? Should you go and hire a buyer’s agent or should you just do it yourself?
Well, I have some questions for you to look at yourself and see whether you should hire a buyer’s agent or not?
The first thing that you need to ask yourself is, are you ready to invest? Do you have $5,000 to $15,000 to spare? What I mean by that is if you were to pay a buyer’s agent $5,000, $10,000, $15,000 out of your own pocket, could you still then afford the deposit and be able to purchase a property? Because if you just got your 5% deposit plus the cost maybe in order to hire a buyer’s agent, you are giving them a percentage of your deposit, they may put you in a position where you cannot get a bank loan and you cannot purchase a property anymore so that kind of rules out a buyer’s agent for you.
And if you are not ready to invest, then it is not worth getting a buyer’s agent yet. You really need to wait until you are ready to invest because a buyer’s agent sets in when you are like, Okay, I am ready to go, I am ready to invest, I need help finding property, negotiating property and purchasing it. So it is only when you are ready to invest, it is only when you can afford it that you should consider a buyer’s agent.
You also need to look at Are you time poor? Do you have time to research and to discover and to invest in properties yourself? Or are you time poor? You are busy working at your job. You are busy working on your career and taking care of your family and you do not want to spend a lot of time researching property areas, researching particular properties going to open for inspections. In that case getting a buyer’s agent can be very helpful because they do a lot of the legwork for you and just bring you a shortlist of properties you could potentially purchase.
Are you looking to invest aggressively without spending a lot of time? If you are looking to grow your property portfolio quickly but you do not have the time to spend on your property portfolio then a buyer’s agent is probably going to be a good idea for you. They are going to help you find the right properties to allow you to invest aggressively and to buy multiple properties and if you do not have the time yourself then again they are going to do all the legwork to help you purchase those properties.
If you are looking to not just purchasing 1 but you are looking to purchasing maybe 3 or 5 within the next couple of years but you do not know where to start, you do not want to do all the work then a buyer’s agent maybe suitable for you.
Are you ready to invest but you do not know where to start? If you are ready to invest, you have your deposit but you do not have any idea how to invest. You do not even have a financial goal that you are really striving for. You just know that you want to invest in property but you do not know where is a good spot or how to invest in property or how the process works then a buyer’s agent can be great for you because they will highlight the areas that they have deemed to be good investment areas. And then they will handhold you through the process of purchasing a property.
So if you do not know where to start at all then a buyer’s agent can be great to help you find areas, help you find properties and help you walk through the property process. And maybe if you want to employ a buyer’s agent for your first property but then you are feeling confident then you go out on your own and you do it by yourself for your second and third properties and so forth. But if you do not have any idea where to start then a buyer’s agent maybe a good idea for you otherwise if you have the time then educate yourself.
Are you a bad negotiator? The whole idea of getting a buyer’s agent is that, yes they do the work for you but the idea is that they can negotiate better on your behalf than you could as well hopefully getting you a discount on a property. Now this is never guaranteed and you are never going to know could you have got a better deal than what the buyer’s agents have. Could you have negotiated better or worse or how much of a discount do they get you, you will never know.
But if you are a bad negotiator and you know you are going into this deal and they are just going to move you up and you are just going to say yes and you are going to end up overpaying for this property then maybe it is worth getting a buyer’s agent who can act as an intermediate between you and the real estate agent so that you do not overpay for the property and you can keep your emotions in check so you do not overpay for the property. So it could be a good idea to have a buyer’s agent to bounce off in that situation.
Are you looking for something extremely specific? If you are purchasing a home and you want exactly what you want, I do not know what that maybe. It may be an attic. It may be a home that has a pool that is a lap pool. Whatever it may be, you are looking for something specific that will suit your needs then it might be worth going to a buyer’s agent because they can just look at the entire market quite quickly.
They work with real estate agents as well so they could find you the property you specifically want. Buyer’s agents can also get access to properties before they hit the general market so if you are after something specific and they go to real estate agents and say here’s what my client wants then the real estate agent might get a property that meets your needs or is very close and might present it to the buyer’s agent before they put it on the general market which allows you to see it and maybe you 7purchase it before it even goes into the market. So if you are looking for something very specific then a buyer’s agent might be a good idea for you.
Do you get anxious or stressed really easy? Because let us face it, the process of buying a house is a pretty stressful process so if you get stressed really easily, if you get anxious then maybe you want a buyer’s agent to help lower that stress level and to help you through that.
So what is a buyer’s agent? A buyer’s agent is a licensed professional specializing in researching, evaluating and negotiating the purchase of property on behalf of the buyer who is likely going to be you. They also can bid auctions for you and generally paid by you the buyer and do not get commissions from the sale of the property. So that is what a buyer’s agent is, that is what a buyer’s agent does. And I hope that those questions about who you are and what your situation is has helped you identify whether or not you should go out and hire a buyer’s agent.
Before you do go and employ a buyer’s agent, I do recommend that you do some of the research yourself throughout that process. So I have created a handy 7 point list for things that you should do if you are going to hire a buyer’s agent. You can get that checklist absolutely free. Simply go to onproperty.com.au/agent, a-g-e-n-t in order to get access to that checklist. You can print it off, you can go through it and this will make sure that you are not overpaying for your buyer’s agent, it will make sure that the properties that the buyer’s agent presenting you meet your needs and you are not overpaying for a property which is really important. We do not want to overpay for a property.
And if you want to see the buyer’s agents that I recommend, then simply go to onproperty.com.au/buyersagents then there you can see their details. I have also provided a disclaimer if I get a commission from those buyer’s agents. Just so you know the number 1 buyer’s agent that I recommend at the moment is Ben Everingham from pumpedonproperty.com. I work very closely with him, we mastermind together, we do episodes together, we talk a lot about our businesses and he is very transparent in the fees that he charges and the way he does business.
He is financially free himself, he was financially free before he was 30 and I trust him. This can be a very dodgy industry and so to have someone that I trust, I am very grateful to be able to recommend him. And I do get a referral fee if you do go to Ben and let him know that you came from Ryan on On Property. But if you are interested in checking him out simply go to pumpedonproperty.com and you can get a free strategy session with him to talk about your financial goals and whether he can help you move towards them. That is who I recommend at the moment, Ben from pumpedonproperty.com just because I trust him and he is transparent with the fees that he charges and how he does business.
So I hope that has been helpful to you guys. So until next time, remember, stay positive!