How Much Do Buyer’s Agents Make? (Ep288)
How much do buyer’s agents make per deal and per year? You will surprised to find out how lucrative this profession can be.
How much do buyer’s agents make? How much do they make per deal that they do in commissions or fees and how much do they make per year as an income? Is it a good income? Is it worth becoming a buyer’s agent?
Those are what I am going to cover in today’s episode.
Hi, I’m Ryan from onproperty.com.au, helping you find positive cash flow property.
A buyer’s agent is someone who goes out and helps you find a property, they help you assess that property and they help you negotiate and buy that property. A lot of investors will employ the services of buyer’s agents in order to find a good investment and a lot of homeowners will look at getting a buyer’s agent to help them find the perfect home for them.
But how much do buyer’s agents make? If you are looking at per deal, how much do they make? Generally buyer’s agents charge between 1% to 3% of the purchase price of a property. But generally most buyer’s agents are around that 2% mark. So you are purchasing a property that’s worth $500,000 this means you are going to be paying around $10,000 for the buyer’s agent. It could be as little as $5,000, it could be as much as $15,000 or potentially even more.
So most buyer’s agents will charge a commission based on the purchase price of the property however some buyer’s agents, especially the ones who help investors buy property generally charge a fixed fee. Probably the lowest you will see for this fee is about $4,000 or $5,000 and this fee can go up to $10,000, $12,000, $15,000 depending on the complexity of the transaction, depending on the purchase price of the property. So that is how much they make per deal, 1% to 3%, generally around the 2% mark so on a $500,000 property, that is $10,000; on a $1 M property, that is $20,000; on a $1.5 million property, that’s $30,000 or they charge a fix fee.
This is generally payable at the end of the deal. So when your contract goes unconditional, it is the time that buyer’s agents collect their fee. They may collect a small portion of that fee upfront. Some buyer’s agents do collect 50% of that fee upfront and then there are buyer’s agents who have fix fees, some of those may actually collect the whole thing upfront. Depending on the buyer’s agent, it can be very different. That is how much buyer’s agents make per deal.
But how much do buyer’s agents make over the course of a year? Every single buyer’s agent is different so it is hard to say this is exactly what a buyer’s agent is going to make in terms of revenue, it terms of income that they take home, that they can spend on them and with their families. So what I am going to do is go through a whole bunch of different scenarios, of different buyer’s agents and different fee amounts to work out how much buyer’s agents could potentially be earning per year.
I am going to start with a baseline level. Let us say buyer’s agents are selling properties at an average of $400,000 and they are getting a commission of 2% on those properties which means the average fee that they are collecting is going to be $8,000. If you have a buyer’s agent who, maybe their marketing is not very good or they are just not servicing that many people. They are only helping 1 person a month, just 1 person and they are getting that $8,000 fee.
They would actually be making $96,000 per year in revenue. And then you would have to take away their cost in order to find out what they earn. Now if someone is a solo buyer’s agent, the cost is going to be pretty low. You have things like insurance, you have their licensing fee, they might have some admin support, and they might have rent-to-pay for either their home offers or their office, websites and stuff like that. But it is not going to be exorbitant amounts of fees if a buyer’s agent is working for himself and does not have a team.
If that same person who is getting $8,000 per deal is doing 5 transactions a month so they are helping 5 people a month which for most buyer’s agents is pretty achievable. Once you get over that, it starts becoming a fair amount of work but 5 is pretty much achievable from what I know about buyer’s agents.
Their annual amount goes to $480,000 just by helping 5 people a month purchase property. And if they stretch themselves and they are helping 10 people every single month purchase property, and I know buyer’s agents who can do this especially if they are helping investors – because there is less intense work helping investors, then there is home owners, if they are doing 10 per month, then that is $960,000 per year minus their cost. So that is a lot of money. As you can see, buyer’s agents, if they are good, if their marketing is good, if they are helping a lot of people, they can make significant amounts of money.
Let us have a look at another scenario, a lower scenario, someone charging $5,000 mark. Let’s say this buyer’s agent helps just 1 person per month that is going to be $60,000 per year. If you can help 5 people per month then you are looking at $300,000 per year. And if you can stretch up to 10 people per month then you are looking at around $600,000 per year minus the cost.
Alright, let us look at buyer’s agents who are working on million dollar homes who are charging around $12,000 per deal or 1 property per month, that is $144,000; 5 properties per month, $720,000; and if they are doing 10 per month, they are doing $1.44 million per year. So as you can see, if a buyer’s agent is good, if a buyer’s agent is charging a significant fee even if they are charging the lowest fee around $5,000, a buyer’s agent is going to make a significant amount of money.
Now I want to look at free property advisors because a lot of people might go to free buyer’s agents or free property mentors or free property advisors. How much are they making per year? You will be surprised to know that even though they offer their services for free, generally they are making more money than a buyer’s agent would on a transaction. A buyer’s agent is charging you, the investor, so it is going to be hard for them to charge exorbitant amounts of money.
However, a free property mentor or a free property advisor or free buyer’s agent is actually earning their commission from the developer or the builder and so their commission is largely hidden so the person they are helping, that they are offering their services for free generally does not know how much money they are making. And it may be in a disclaimer somewhere, probably in the fine print but most people do not look into that so they do not know. These people are often making $20,000 to $40,000 per deal that they are doing on new build house and land packages.
So that is pretty significant and you begin to see, when we talk about the deals, why you see so many of these property advisors and property mentors and why they could potentially be happy to sell a dead property to someone when they might not get repeat clients because they are going make so much money anyway. So if someone is making $25,000 per deal, if they are doing just one per month, that is $300,000 per year; if they are doing 5 per month, that is $1.5 million per year; and if they are doing 10 deals per month, $3 million per year. And if they are making 40 grand per deal, it is not that uncommon for property advisors to make $40,000 per deal, it is on the high end but it is not completely uncommon.
If they are doing just 1 per month, just servicing 1 person per month, 40 grand per deal, that is $480,000 per year; if they are doing 5 per month, that is $2.4 million per year; and if they are doing 10 per month, that is $4.8 million per year.
So you can see why these property mentors, these property marketers and property advisors can offer their services for free and why they can go out and they can do all these sorts of marketing on the internet, they can run these free events, create these mentor networks and stuff because they are making significant amounts of money on low volume of people. And look, if you buy 1 per month and you disappear, that is alright they are just going to find 1 other person again. Whereas a buyer’s agent is only making $5,000 per deal, they want repeat clients in order to earn a significant amount of money.
But for someone who is a free buyer’s agent, a free property advisor, they are getting $20,000 to $40,000 out of a person, they are going to make a significant amount of money for the year whether they screw you over and you do not come back or they treat you well and you do repeat business.
So you can see why this industry is rife with dodgy people out there who just try to sell properties because if I started a company and I just decided to leverage on property, to market properties that could potentially be positive cash flow and I am making 20 grand from the developer per deal, I only have to sell 1 per month to make $480,000 per year which I know make $300,000 per year which is a lot more than I am making. But I do not want to sell dodgy properties to you guys. I do not want to sell any properties to you guys. I want to provide you with education and information to help you in your buying decisions.
So I hope that explains to you how much buyer’s agents make per deal and also how much the potential they have to make over the course of the year. It is going to be different for every buyer’s agent because every buyer’s agent has a different fee structure and every buyer’s agent is doing different volumes and as well, different buyer’s agents have different overhead costs.
If you are working for yourself from your own home, then your cost are going to be a lot lower. If you have created a company and you have offices and staffs to support then your overheads are going to be a lot higher and so the take on it is going to be different. But as you can see, it is a very lucrative market for buyer’s agents who are successful in this market.
I hope that that has helped you. I do recommend, before working with a buyer’s agent that you do your own research. And to help you do that, I have created a 7 point checklist that you can go through while working with a buyer’s agent to make sure that you are getting a good deal. To check that out, simply go to onproperty.com.au/agent, a-g-e-n-t to get access to that free checklist. And if you want to see the buyer’s agents that I recommend then you can go to onproperty.com.au/buyersagents, which are both plural and you can check them out there. And I will put a disclaimer on there if I do get a commission or referral fee for recommending you to those buyer’s agents.
Just so you know at the moment, the only person I am getting a referral for is Ben from Pumped on Property who is my number 1 recommended buyer’s agent.
I work closely with him. We do a lot of interviews together; we talk about our businesses, we kind of mastermind together. I trust him, I trust his services and he is transparent with the fees that he charges and the ways that he make money. And so that is why I recommend him because I trust his transparency.
And so that is how much buyer’s agents make. Are you happy with that? Do you want to go out and become a buyer’s agent now? I am guessing a lot of people will after learning how much money buyer’s agents can make.
Until next time guys, stay positive.