How Much Do Buyer’s Agents Charge (ep287)
Buyer’s agents have 3 main ways of charging you and all have very similar pricing. So how much do buyer’s agents charge and are they worth it?
If you are looking at investing in property using the help of a buyer’s agent, you are going to want to know how much does a buyer’s agent charge. Different buyer’s agents charge different amounts and have different pricing structures. In this episode I am going to go through the different charges that buyer’s agents have so you can know exactly how much you are going to need to pay.
Hi, I’m Ryan from onproperty.com.au, helping you find positive cash flow property.
I run my own membership site where I help teach people how to find positive cash flow properties and I list high rental yield properties in there. But every now and then I have someone coming to me who wants more personalized help. They want someone to sit down with them to go through the process with them and really help them to find and buy a great investment property. That is not a service that I offer so when they come to me and they want that sort of help, I always direct them on to a buyer’s agent. A buyer’s agent, especially when they are good investors themselves, can be a great resource in helping you grow your property portfolio and buy an investment property that is actually going to deliver the financial returns that you want.
But this episode is all about how much the buyer’s agents charge. Well, there are 3 main strategies that I have seen buyer’s agents employ when they are charging their clients. The most common strategy that buyer’s agents use is the percentage of the purchase price of the property. This generally hovers around the 1% to 3% mark but it is a lot more common to see buyer’s agents charging around the 2% mark of the purchase price of the property. They maybe a small payment upfront but generally the bulk of the payment is either paid when you go unconditional on your loan or when you finally settle and you get the keys to the property. Generally speaking, in almost all of these cases the payment to the buyer’s agent is going to need to be in cash that you are going to need to have yourself. So you are not going be able, generally, to get a loan from the bank to cover the buyer’s agent’s fee or talk to your mortgage broker because that might be something that you can explore.
So generally they charge around 1% to 3%, so to give you an idea, for a $500,000 property that is about $10,000 to $15,000 that you will be paying a buyer’s agent. On a $1.5 million property, which is the higher end of the property market in most cases, you are going to be paying a buyer’s agent somewhere around $15,000 to $45,000. As you can see, the more expensive the property the more expensive the buyer’s agent is going to be. For example for someone who I recently interviewed, Lloyd Edge, he is charging about 1.8% of the purchase price of the property.
So the benefit with a price structure like this when you are using your buyer’s agent is generally you do not need to pay this fee until they find and successfully help you purchase an investment property. This means there is no upfront fee that you need to be pay whether they are good or not. It is only once they do the work and find the property for you that you are then going to have to pay for their services, which can be very helpful.
Another common way that buyer’s agents charge is just a flat fee. It is just a one-time fee or they might split it into 2 or 3 different payments but it is just a set fee. No matter what amount of money you are spending, no matter what kind of property you are buying, they are going to charge you a flat fee. Now these fees are generally between $10,000 to $15,000. If you are purchasing an investment property then generally you can find buyer’s agents who charge more around the $10,000 mark. I believe – I am not a buyer’s agent so I am not a hundred percent sure but I believe that helping someone find an investment property where it is all about the numbers and whether this is going to be a good financial decisionwould be easier and less work than helping someone find a home where that is a very emotional decision, very discretionary. It is very hard to find exactly what they want emotionally but if you are saying, I want to invest in property, here is my price range, and here is the return that I want. If something stacks up and the figures are right, it is easy for someone to make that purchase than it is to buy a home. So if you are looking at purchasing an investment property, you may be able to source a buyer’s agent who does not have as expensive fees.
For example Ben from Pumped on Property, who I recommend as my number 1 buyer’s agent, has very competitive fees whether that is a new build or an existing property. So he is going to help people find and buy investment properties. I recommend him because he is financially free already, very trustworthy guy. This industry can be very dodgy, he is the person I trust the most in this industry that is why I recommend him and I do get a referral fee if you mention that you came from Ryan from On Property.
Anyway, the third way that buyer’s agents charge is they use a tiered pricing structure. So rather than a percentage of the purchase price or rather than just a flat fee, they might charge you a tiered pricing structure which means you have a property under a million dollars, they are going to charge you a certain amount. Or if you have a property over a million dollars, then they are going to charge you probably more money than they will charge you for under a million dollars. The way that they justify this is it is not necessarily that the work is so much harder for a property that is over a million dollars, but it is the fact that if they are a good negotiator, then they can get a higher discount for you which means their services are worth more money. An example for this is mypropertybuyersagent.com, they charge $11,000 for properties under $1 million and $13,750 for properties over $1 million in value. So you can see the price difference is not massive there but if you are buying a more expensive property, they will charge you a little bit more.
So there you have the 3 main pricing structures of how buyer’s agents charge you for their services. There is the percentage of the purchase price which tends to be between 1% to 3% but generally more around the 2% mark. There is a flat fee which is generally around $10,000 to $15,000; more on the lower end for an investment property and expect more from the high out $10,000 to $15,000 or more for purchasing your own home. Then there is the tiered pricing structure based on the value of your home. They will charge you a flat fee of a certain amount and if you go over a certain threshold then the fee increases. So there are the 3 ways that buyer’s agents charge and that gives you an idea of how much you are going to pay if you want to hire a buyer’s agent.
Now buyer’s agents also offer additional services depending on the buyer’s agent. It will depend on what services they offer and how much they charge for these services but some examples of these services is auction bidding. So if you are wanting to purchase a property that is going to auction, you can employ your buyer’s agent to go to the auction for you and to bid on your behalf. If you are too scared that you are going to get emotional and you are going to bid too much or if you are not going to bid using the right strategy, you can get them to bid for you with the hopes that they can get the property for a lower price than you and they can help you to secure that property. Prices for auction bidding are generally around $500 to $1,000 in order for this service.
You also have renovation and project management on renovations and these do vary. You are probably looking at around at least $4,000 to $5,000 in order to get a renovation done. That fee is not going to be all towards the buyer’s agent. It may be in some cases but it may also go towards the renovation, getting the painting done, getting all these sort of things done. But you are generally going to look at around $4,000 to $5,000 or more to get help with the renovation or to get into a project, manage a property. But you would need to speak to them about what is included in that. Is it for renovation or is it just their fee.
They also have partial buyer’s agency services. Most buyer’s agents help you from the day 1, they help you from setting a strategy, setting a financial plan, shortlisting properties, negotiating on the price of the property. They help you through the buying process until you settle on the property. They help you do everything, which is great because I hate paperwork. If I can get someone else to do that, all that legwork and stuff for me then that would be great. But some people only want help maybe shortlisting the properties. Then they want to go out and inspect the properties and negotiate themselves. Or maybe people have a shortlist of properties that they want to buy and they are wary they are not going to negotiate well so they are going to hire a buyer’s agent just to help them negotiate. So there are these partial services that buyer’s agents offer. In terms of how much they charge, not many buyer’s agents actually market this.It is generally something that you need to negotiate with them but it would be a fraction of the price that you would usually have to pay because they are only doing a fraction of work. So speak to your chosen buyer’s agent about how much they charge for partial service depending on what you want them to do.
And there are also property inspections that buyer’s agents can go and inspect the property for you, let you know any concerns that they have or whether they think the property is a good deal. And again, this is not something that they really advertise because it is not something that a lot of people want. Generally you get a buyer’s agent to do everything and then you get a building and pest inspection done on your property. You can speak to your chosen buyer’s agent about how much it would cost for help with the inspection.
I just want to say a word of warning, be careful of buyer’s agents who are offering their services for free. They may advertise themselves as free buyer’s agents, free property advisors, or property mentors. Basically you need to be careful and I have talked about this in length on onproperty.com.au/283 about these free property advisors. You do need to be careful because they are actually making a commission from the sale of the property generally from the developers and these commissions can be quite high and often lead to people buying properties and paying more than what the property is actually worth. So if someone is offering you their buyer’s agency services for free, then be very careful with that because it might lead to you purchasing a property that is overpriced. So you always need to do your own research.
You should also know that when you are paying a buyer’s agent, generally that payment is going to be a tax deductible expense because that is actually a service that you are employing in order to purchase an investment that is going to generate you a profit. So in most cases that is going to be a tax deductible expense, obviously, speak to your buyer’s agent and speak to your accountant about that expense to make sure that you can claim it.
So I hope this has helped answer your question how much do buyer’s agents charge and giving you an overview of their fee structure and how much you can expect to pay if you do go out there and hire a buyer’s agent to help you buy either your own home or an investment property.
Now I have created a 7 point checklist for the 7 Things That You Should Do Before Buying Property ThroughABuyer’s Agent. I do encourage you to go and get that checklist. Make sure that you are doing your own research on the buyer’s agent that you choose. You want to choose the right buyer’s agent for you. I have some checkpoints on the checklist there about choosing the right buyer’s agent. And when they present you the properties, you want to make sure that this property is right for you, that this property is not overpriced, so we have some points in the checklist there about making sure that it is the right property and that it is not going to be overpriced. So if you want to get access to that 7 point checklist, The Things That You Should Do Before Buying Property Through A Buyer’s Agent, go to onproperty.com.au/agent, a-g-e-n-t and you can get that absolutely free. So if you are going to use a buyer’s agent, you still need to do some of your own research. That is very important so you do not get stung, buy a dead deal, go to onproperty.com.au/agent in order to get access to that free guide. And if you want to see the buyer’s agents that I recommend then you can go to onproperty.com.au/buyersagents in order to see the list of the buyer’s agents that I recommend. And there is a disclaimer on there if I do make a referral fee from those buyer’s agents so you can know, Okay. He’s recommending Ben and he’s number 1 but he’s getting paid a referral fee so let’s take that with a grain of salt. But seriously I would not recommend someone if I don’t actually thing that they are going to deliver the result because I care about my readers, I care about my audience. The bulk of my money is not made through recommending buyer’s agents and so I only recommend people that I trust and that I believe in. And so you can check that out on onproeprty.com.au/buyersagents. Anyway, let us close this off because I have been talking for too long.
I hope that this has been helpful. Love you guys! Thank you so much for watching and listening!
And until next time, stay positive!