Select your buyer's agent wisely: What you need to consider
Buyer's agents, or buyer's advocates as they are commonly known in Victoria, are increasingly a consideration for many home buyers and investors wanting to make better financial choices. However, different buyer's agents have different skills and it's worth knowing what it is you need before signing up and paying for their services.
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Finding a location
If you're a home buyer, it's likely you already have locations in mind where you are happy to live. If you're a straightforward investor, perhaps not so much. Let's firstly look at the role of a buyer's agent when it comes to finding you a location.
Many buyer's agents now take on the role of location researchers, or 'hotspot' experts, where they trawl the country or select locations to find growth spots for their clients.
For some investors, outsourcing this part of the process may sound like a dream come true. If you're in this category, and you're willing to buy in any state or territory, then you'll likely be looking towards a national agency, or an operator with access to data on every suburb available. You'll want to ensure they have a close understanding of the values and laws in these areas.
If, however, you are only comfortable buying within a certain state, or perhaps even a certain city or area you have picked as ripe for growth yourself, then it is more likely you'll want to look towards a specific location, or 'local', expert. Local experts are more likely to know which blocks can be developed and to be well versed on the specific good and bad streets of a suburb, as well as properties with difficult neighbours. This qualitative information isn't necessarily going to be available at the hands of a national agent.
Negotiating
If you’ve already found a property or are clear on what you want, then you might want to skip straight to someone who is an expert at settlement and negotiating. Many buyer’s agents were previously real estate agents, so they are well equipped with the confidence and knowledge to negotiate your sale. If you are likely to be sending the buyer’s agent into auction for you, make sure you see them in action first. Ask for solid examples of where they have saved their clients money (you’ll be wanting to see that their fee is saved by the money you save on your purchase).
You'll also want to ask them for statistics from their business, for instance - what is the average percentage by which they negotiate property down?
The style of the buyer's agent
Some buyer's agents specialise in certain types of property. Perhaps the properties are prestige, or under $300,000. Ensure your property and buying style, such as investor or home buyer, aligns with the buyer’s agency you are considering. If they are mainly buying inner city units, you may want to reconsider asking them to help you find and buy a country homestead.
Some buyer's agents are lone operators, while others have significantly sized staff. Ensure you know what will make you most comfortable - personalised service, a more corporate feel, or somewhere inbetween? Ensure you don't judge an operation by its number of staff, however it's worth asking who you would be dealing with throughout the process.
The Real Estate Buyer's Association of Australia recommends that you ask a number of questions, including:
- How experienced is the buyers’ agent?
- What qualifications do they have?
- What are their most recent purchases?
- Can they provide recent client testimonials/references?
- Do they own property themselves?
- Do they have the contacts to find you the property that best suits your criteria?
Ensure you aware of their background, education and how they got into the position they are in now. Treat your conversations as an informal job interview - afterall, you are hiring them for a particular purpose.
Their fee structure
Find out how much they will cost you upfront and ask yourself whether their services are worth that amount to you. If they are charging a percentage of the final property cost, ask them how they have an interest in keeping the property price as low as possible when they get paid far more lucratively for more expensive sales.
Ask about kickbacks or commissions being received, particularly where new and off the plan sales are concerned. Try and ensure their independence as much as possible.
You'll want to speak to a number of buyer's agents before you make up your mind, so keep notes as to how much each will cost you. Don't be afraid to ask them to justify their price and how it is worth it for your property purchase. Fees can vary dramatically, from a few thousand dollars up to around $25,000 in some instances.
Their network
One of the often undiscussed benefits of a buyer's agent is their access to other professionals in the space. Whether it's real estate agents, building and pest inspectors or similar, you'll want to know that they have good relationships with the necessary experts. Responding on Twitter, one reader mentioned that it is crucial that the buyer's agent walks through the home with the building and pest inspector, as well as has a good look at the nooks and crannies. That is, they should be able to have a look in the attic and know what they're looking for, as much as they should be able to look at a contract and know what is within it.
Bells and whistles
Some buyer’s agencies also offer finance, development assistance, insurances, property management and similar in what is often described as a “one stop shop” approach. Not every investor or home buyer will want all their eggs in one basket, and it is always wise to consider all of the options available to you.
Others also fall onto the line of creating strategies and plans for your investments. If you are looking to build a portfolio, then it may make sense to consider speaking with a buyer's agent who understands the importance of your portfolio and may assist in this endeavour. Some provide goal-setting, mentoring and similar services, and where these suit some investors, others will not be as keen. Be clear on the role of the buyer's agent to you and the service you are looking for.
Many will opt for a buyer’s agent if they believe it will save them time and stress.
And finally, it may come down to checking their fees, licensing, insurances and how other people have found their services.
It can be hard to protect yourself, but always ensure you are dealing with a licensed real estate agent (buyer’s agents need this licence too). Search online for what is being said about them, and always double check references. A referral can often hold far more power than a slick brochure.