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. Every buyer is different. Their wants and needs are unique. As such, every client and the fee they pay should be addressed on a case-by-case basis. Buyer’s agents should tailor their approach to each buyer’s individual needs and wants, criteria and budget.
If your buyer’s agent isn’t doing that and/or are so willing to undercut competitors on their fees, you need to ask them why. Do they lack experience perhaps? Do they lack contacts within the industry? Is their property sales knowledge not what it should be?
“Inexperience can be a significant factor in this,” says Cohen Handler Associate Leon Jacques.
What is most important to you as a buyer?
“Some ‘buyer’s agents’ might have changed from their roles as plumbers or school teachers after watching Million Dollar Listing on TV and think they can do that too. Because of that the only way they can get traction and get clients is by offering very low fees. With that comes a lack of experience, especially in appraising what a property is really worth. That can end up costing you much more than you might have saved in fees.
“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 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.”
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.
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 miss 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.
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.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.