A guide to buyer’s agents and their fees. Part 1
How do you know when you’re getting what you want, and what you’re paying for when it comes to buyer’s agents and their fees?
Or if you’re not?
Most buyer’s agents fees will start at one per cent and move up depending on the service type the client wants.
Every property is different, and every buyer is unique. In the real estate market, the goal of any buyer’s agent is to understand the factors that shape real estate purchases and push for the best possible result for their client. But as a prospective buyer, how do you know that you’re getting what you pay for when it comes to the services of your buyer’s agent?
In this article series, we’re going to unpack what enlisting the services of a buyer’s agent can do for you as a prospective buyer in the real estate market. Further, we’re going to detail how you can ensure that you’re getting what you pay for when it comes to a buyer’s agents fees.
We’re going to show you what a good buyer’s agent does, and what to look for in a buyer’s agents’ efforts to tailor their strategies to your purchasing criteria and budget. Read on here to learn more about how Cohen Handler can help you make the purchase that works for you.
What is most important to you as a buyer?
Understanding the Way a Buyer’s Agent Adds Value
Understanding the way that a good buyer’s agent adds value is key, and it will shape the way you approach budgeting for the services of a good buyer’s agent. First, let’s look at one of the major traps so many prospective buyer’s find themselves falling into – shopping for the cheapest deal.
For a great number of entrants to the real estate market, the sheer cost of purchasing a property can give prospective buyers pause at the question of voluntarily adding any further costs of the project. But that is just it, the scale of the investment that buying a property represents makes it all the more important that you get it right.
“A buyer’s agent’s job is to protect the buyer. Not just to do a deal for the sake of doing a deal. We stop you from overpaying.” says Cohen Handler Associate Leon Jacques. When it comes to ensuring that you are getting what you pay for – both for your property and the guidance of a buyer’s agent – the ‘cost-effective’ option simply doesn’t cut it.
Some of the less experienced buyer’s agents out there will present their services at a heavily discounted rate, in an effort to draw business and gain traction. Most buyer’s agents’ fees will start at one per cent and move up depending on the service type the client wants.
In terms of the fee structure, most buyer’s agents offer several options with prices differing accordingly:
- Full service: search and purchase
- Evaluation and negotiation
- Auction bidding service
There are a number of different ways to structure a fee agreement. For example, it could be a fixed fee for auction bidding or a percentage of the sale price for the full buyer’s agent service.
If your buyer’s agent isn’t starting from this baseline, you have to ask yourself why. Do they lack experience perhaps? Do they lack contacts within the industry? Is their property sales knowledge not what it should be? When considering dealing with a buyer’s agent with overly enticing fee’s, there are plenty of underlying issues to consider also.
“Inexperience can be a significant factor.” says Cohen Handler Associate Leon Jacques. “With that also comes the eagerness to do the deal, based on the fact they have little or no income or business coming in.”
A lack of experience, especially in appraising what a property is really worth, can end up costing you much more than you might have saved in fees.
Value for money
Experts surveyed about the value of buyer’s agents, by Australia’s leading consumer advocacy group Choice, point to the crucial importance of the services provided.
“A buyer’s agent can offer real value when it comes to valuing the property and securing the deal,” said Vince Mangioni, Associate Professor in property economics and development at the University of Technology, Sydney.
He believes a crucial part of the services that buyer’s agents offer is to help their clients understand what a property is worth, so that they don’t overspend and so that they don’t overspend and avoid missing out. In the majority of cases, this is something the client would not be able to do without their agent’s experience and expertise.
If you want to find the best house for you, your family and your lifestyle, you need access to the best service, the greatest expertise and the deepest experience. The property market is a very competitive one.
Breaking Down the Fees of the Best Buyer’s Agents
In your initial discussions with buyer’s agents and the fees they charge, you should be questioning them about five key areas:
- Price: What is the cost of the services you provide?
- Expertise: What areas do you specialise in?
- Experience: How long have you been in the industry?
- Connections: What are your relationships with seller’s agents like?
- Off-market: What percentage of the properties that you purchase are off-market?
In our dealings with our clients over the past 10 years, these are the factors that people looking to purchase property consistently want to see most in a buyer’s agent.
Use Case – Consider What You Need From Your Buyer’s Agent
Cohen Handler Associate Michael Connolly was recently knocked back by a potential client who opted to go with a rival buyer’s agent instead, due to their lower margin.
However, the client soon discovered a lower margin, also meant a lower level of service.
The cheaper agent she opted for, didn’t source or visit any properties for her. Instead they simply forwarded her a list from property websites to inspect on her own.
When such an approach proved, understandably, futile, the woman came back to Michael to secure his services in her search for a new home. With a far better understanding of why some buyer’s agents undercut others on their fees.
“It didn’t work out for her. She wasn’t happy with the service that was offered,” Michael Connolly said.
“She was not getting access to off-market properties (Cohen Handler purchases around two-thirds of our properties off-market and pre-market) and was frustrated at not getting access to more stock. She kept hearing our name in the market and was continually asked why she wasn’t working with Cohen Handler. So, she saw the value in signing with us.”
It’s another buyer beware scenario. So what’s the solution?
Stay tuned for the second part in this series about buyer’s agents and the fees they charge.
To learn more now, contact Cohen Handler today.