CohenHandler featured on cover page of Domain on 19 February 2010
Seller beware as buyer’s agents level playing field
February 19, 2011
Done deal … Carol Alexander with buyer’s agent Ben Handler Photo: Marco Del Grande
More and more buyers are getting professionals to act on their behalf.
Once upon a time, a house sale involved a “for sale” sign and a price. If the agent turned up for the inspection, all the better.
Now there are whole sales teams on the job with a marketing budget and campaign strategy geared towards forcing buyers to increase their best offer, usually in a high-stakes auction.
It’s good news for vendors but buyers are often left at a serious disadvantage. Is it any wonder more of them are bringing in their own professionals to level the playing field?
Honest feedback makes the difference
Name: Carol Alexander
Buyer’s agent: Cohen Handler Exclusive Buyer’s Agents
Challenge: To buy a three-bedroom house with a separate office and entry in the eastern suburbs.
Budget: Less than $2.5 million.
When Carol Alexander, 50, decided to leave her long-time home in Lindfield on the north shore to live closer to family in the eastern suburbs, she doggedly refused help in finding her new home.
As a single mother of three children, aged 25, 23 and 18, after her husband died 15 years earlier, the weekly trips across Sydney to inspect property quickly started to take their toll.
After eight months she threw in the towel and turned to a buyer’s agent for help. Three weeks later the kinesiologist exchanged on her four-bedroom semi in Dover Heights.
“I never would have found this place because it was off the market and I only had to inspect five properties before I had it,” Alexander says.
While she appreciated finding her new home, she preferred the feedback on what other homes were worth.
“If I liked a place, my agent told me if he thought it was worth the money. I liked that honesty and the fact they weren’t just trying to close the deal.”
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“Selling agents are far better educated and sophisticated in their negotiation skills nowadays and many agencies are now providing ongoing training programs that ensure they get the best sales results,” says the business development director with Rose and Jones, Stuart Jones.
“Given that everything about the campaign is geared in the vendor’s favour, buyers need to be just as savvy and just as educated about market value. Or they need a buyer’s agent.
“It’s all been made that much harder now agents are shrinking what used to be a six-week campaign into four weeks to funnel people through in a shorter time, give the campaign more momentum and make the most of the hype at auction before buyers can think too long and clearly about it.”
The principal of buyer’s agent Good Deeds, Veronica Morgan, says the large sums being paid for property make a strong argument for buyers to seek informed advice.
“It would be very rare for someone to buy $20,000 worth of shares without any professional guidance and yet Sydneysiders are constantly spending more than that on taxes alone without any professional input,” she says. “That leaves them so exposed to potential problems.”
When Janne Sutcliffe first started in 1997 sourcing and buying real estate for many of her contacts in Sydney’s film industry, there wasn’t even a name to describe the service she was providing.
“Those early clients in the film industry are good at delegating, so it worked well for both parties to just get on with the job of buying a new home,” Sutcliffe says.
“Then along came the time-poor executives looking for more high-end property.”
While the bulk of Sutcliffe’s clients at her business, Change of Address, are still predominantly executives or film-industry types, it is a far broader client list for the estimated 100 exclusive buyer’s agents around the country who have since joined her ranks.
A consultant with Finders Keepers, Gina Machado, says high-end clients used to make up the bulk of her business “but that’s not the case at all any more”.
“Half of our clients used to be expats but that’s down now the dollar is doing so well,” she says. “Investors are increasingly turning to us, as well as people who are moving out of an area.”
To that end, Morgan says her Rozelle-based business proves buyer’s agents are not just a luxury of the multimillion-dollar buyers. “Three-quarters of our clients spend less than $1 million,” she says.
Is the fare fair?
For many, the idea of paying a second commission when they buy real estate – after having already paid a commission for their sold property – is difficult to grasp.
Given buyer’s agents generally charge a commission of 1 per cent to 2 per cent of the purchase price or a set fee of between $6000 and $15,000 for negotiating a sale price (and as much as $400,000 for a full service on a $20 million property), it is no surprise they have a reputation as being a high-end luxury.
But some house hunters will think that’s a fair price to avoid months of inspections, dealing with often elusive sales agents and turning up at countless auctions to see it sell well above expectations.
That convenience and market expertise should not be confused with assurances the agent will offset their commission by achieving a smaller sales price, says the president of the Real Estate Buyers Agents Association of Australia (REBAA), Byron Rose.
“That’s impossible to prove so it’s a baseless claim,” he says. “If a property is priced at $600,000 and you get it for $575,000, have you saved the client $25,000 or was it overpriced to start with?”
“If you pay $625,000, have you done your client a disservice or found them the right place with good capital growth and investment yields? It’s not just about saving money but paying a fair price for a quality home.”
Then there’s what Morgan tactfully refers to as “interpreting the selling agents”.
“Selling agents are often accused of being liars and, in the sense that they don’t reveal the full story to buyers, they are,” she says.
“The difference for us is agents tend to give us the full story so our clients can make an informed decision.”
For investors, there are what the managing director of Property Buyer and chair of the buyer’s agents chapter at the Real Estate Institute of NSW, Rich Harvey, describes as “wholesale investment opportunities”, whereby he introduces clients to a particular development and the developer waives the sales commission.
For example, Harvey says on a $450,000 property, which would usually include a $30,000 sales commission, an investor will instead pay the agency’s flat fee of $9000 so the same property amounts to $429,000. “Less than what they would have to pay without us and our fee,” he says.
Not quite mainstream
While there is a broader demand for buyer’s agents, that doesn’t make them part of the mainstream market.
A survey by the REBAA shows the industry’s major players alone accounted for $636 million worth of residential sales in NSW last financial year, which represents less than 1 per cent of the more than $90 billion worth of residential property that traded during the same time.
As Harvey puts it: “We are not mainstream but we are certainly growing in public acceptance and awareness. The market is slowly maturing to the point that we are no longer just considered a service for time-poor executives.”