What is a buyer’s agent and do you need one?
A buyer’s agent, also known as a buyer’s advocate, is a licensed professional who searches, assesses and negotiates a property purchase on behalf of the buyer.
They are essential in today’s sophisticated property market, especially for first-time buyers or newbie investors who need all the help they get when stepping into the real estate game.
Read on to learn more about buyer’s agents, what they do and how much they charge.
What Does a Buyer’s Agent Do?
Your buyer’s agent can do as much or as little as you need. A buyer’s advocate can provide both full and partial services, catering to all types of home buyers—from those who need an agent to act on their behalf through every stage of the house-buying process to those that just require someone to bid for them at a property auction.
Here are more details:
1. Help you decide what kind of property you need
Firstly, buyer’s agents collaborate with their clients to determine what kind of property would work best for their requirements, including location, house size, proximity to amenities and other relevant factors. An investor’s agent, for instance, would concentrate on a property that promises capital growth and generous returns.
2. Put together a list of the homes that fit your criteria
The second step is when the property search begins. The agent will give a list of potential properties for you to inspect as well as notify you when new listings matching your requirements become available.
3. Inspect the property
Once the client is interested in a specific house, the buyer’s agent will carry out comprehensive research and provide a written property appraisal based on sales data, inspections and communication with vendor agents and/or owners. The appraisal should clearly state the property’s market price, i.e. how much the home is worth compared to other properties in the area.
4. Negotiate the best price
This is the time when a buyer’s agent can really show off their skills and get you the best possible price on the home you are interested in. In addition to helping you secure the property (whether it is at auction or by negotiating with the seller), buyer’s advocates can assist you with pre-settlement inspections, the exchange of contracts and settlement.
What won’t a buyer’s agent do?
A buyer’s agent cannot get you a home loan or help you apply for one. If you are thinking of getting a mortgage to finance the purchase, it is best to talk to a mortgage broker who will find the best lender for your needs and financial situation.
What is the difference between a real estate agent and a buyer’s agent?
The main difference between the two is who they work for. A real estate agent works for the seller, whereas a buyer’s agent is hired by the buyer. So, during an auction, it’s agent vs. agent: the buyer’s agent trying to keep the cost more affordable to their client, while the real estate agent aims to increase the price as much as possible for the vendor.
This is an important distinction to make as it is illegal for a buyer’s agent to accept payment from a real estate agent in the house-buying process. If they do so, it means the buyer’s agent is not working in the buyer’s best interest and cannot provide unbiased services.
What Is a Buyer’s Agent Fee
The fee a buyer’s agent charges is mostly determined by the type of service you need. Home buyers who want the buyer’s agent to handle everything will pay more than clients after specific services, such as finding a property or bidding at auction.
Even though there is no set rule about how much buyer’s agents charge, they tend to employ one of three fee structures:
Percentage of the property price
This usually ranges between 1.5 to 3.5% (plus GST) of the purchase price. The percentage is higher if the agent provides a full service and lower if they are offering partial service.
For instance, if the home you are interested in costs $1.5 million, you could expect to pay from $30,000 to $45,000 for a ‘full service’ buyer’s agent. Appraisal & negotiation services only can cost you around 0.9% of the purchase price, or $13,500 in this case.
This model has a few disadvantages, the first being that you won’t know how much you owe until the sale is completed. Additionally, the buyer’s agent might not try to negotiate a lower purchase cost since it’s not in their best interest.
Tiered fixed fee
In this pricing structure, a buyer’s agent charges a set fee that is determined according to the property’s tier or price range.
While this pricing model gives you a good idea of how much you’ll spend, it doesn’t work out that well for buyers of smaller properties.
For example, if the property is priced at $750,000, the fixed fee is around $12,000 (+ GST) which is the same amount you would buy if the house was priced at one million.
This is a flat fee that you pay to the agent regardless of the final sale price of the property. It can range from $1,000 to $10,000 depending on the services provided. This model might suit those interested in bigger properties, but buyers on the hunt for a modestly priced home could end up overpaying.
Buyer’s agent’s fees by city
Location is another factor to consider when it comes to buyer’s agent’s fees. Home buyers in Sydney, the country’s most expensive housing market, will most likely have to pay higher fees—Sydney’s buyer’s agents typically charge $7,000-$20,000 with an average of around $12,000.
Note that many agents in Sydney will charge you for extras like property and pest inspection fees as well.
This is what buyer’s agent fees look like in other major cities:
|Percentage-based fee||Average flat fee|
|Buyer’s agent Melbourne||1.2%–2.75%||$3,500–$10,500|
|Buyer’s agent Brisbane||1%–3%||$6,000–$18,000|
|Buyer’s agent Adelaide||1.5%–2.5%||$10,000|
|Buyer’s agent Canberra||1.8%–2.8%||$12,000|
|Buyer’s agent Perth||1.8%–2.5%||$11,000|
|Buyer’s agent Hobart||1%–2%||$4,000–$12,000|
|Buyer’s agent Darwin||1%–3%||$5,000–$15,000|
In addition, buyer’s agents have an upfront retainer fee which can start at $1,000 or go up to 50% of the fee. This fee (or some of it) is also non-refundable so check all the pricing details (including how much and when you are required to pay) before signing on the dotted line.
Why Should You Use a Buyer’s Agent?
There are several benefits to using a buyer’s agent when purchasing a home.
1. Save time and effort
Thanks to their extensive network of real estate agents, buyer’s agents can save you months of research and property searches. So instead of wasting your weekends looking at homes, some of which may not be right for you, a buyer’s agent will shortlist the most suitable properties according to your wish list.
2. Get access to listings before anyone else
Buyer’s agents have access to off market listings, i.e. when a property is sold without any public announcement or advertisement. This way you can swoop in with a good price before anyone else gets the chance.
3. Facilitate interstate buying
Investors and homeowners moving to another state will need a local buyer’s agent who knows the market inside out and can provide valuable information about potential investments, moderately-priced homes as well as the location of amenities (schools, shops, services) that are on the buyer’s list of requirements.
4. Benefit investors
There are buyer’s agents who specialise in investment properties, ensuring that their clients get the best location and type of home for capital growth. They also provide invaluable expert advice that may stop you from making a bad investment decision.
5. Provide help if you are buying and selling at the same time
Many home buyers cannot afford to buy a house outright and usually need to sell an existing property, which can be extremely stressful to buyers. Luckily when buying real estate, an agent can take some of that stress away, leaving you to focus on selling your current home.
6. Get the best price
A buyer’s agent works only for the buyer and has their best interest in mind and so will be able to get the best possible price on the home.
7. Eliminate stress and emotions when buying a property
Once you find your dream home you could easily be tempted to overpay just to beat out other offers. With a buyer’s agent by your side, this won’t be an issue as they will provide unbiased information and advice. A professional can tell you if the price of the home is realistic or not and how likely you are to get the property.
How do I choose a good buyer’s agent?
What factors should you consider when choosing a buyer’s agent? These tips might help you.
- Make sure they are licensed & independent
- Look for someone with a good understanding and experience of the local property market
- Check their track record
- Read up on online reviews and recommendations by previous customers
- Compare fees
- Make sure that there is an open line of communication
Are there any disadvantages of using a buyers agent?
They may save you time and energy, but agents are unlikely to budge on price. For people interested in seven-figure homes, the cost could be thousands of dollars in addition to what you will already pay for the property, GST, and other related costs.
Even if the buyer’s agent has a fixed fee payment structure, you will still need to pay a retainer fee, so costs will easily add up.
You need to carefully consider if the outcome is worth the investment. Will the money the buyer’s agent saves by negotiating a better purchase price cover their fees?
You also need to be wary of unethical buyer’s agents. Inquiring about their qualifications, licences and whether they are members of REBAA (Real Estate Buyers Agents Association of Australia) is important as there are dishonest buyer’s advocates in the industry who might take advantage of inexperienced buyers.
Bottom Line: Is a Buyer’s Agent a Good Idea?
The answer is a resounding yes! What is a buyers agent if not someone who saves you time and energy, handles tiresome paperwork, negotiates unemotionally on your behalf and gives you access to off market properties?
However, before you hire a buyer’s advocate, make sure to check their fees, qualifications and credentials. Also, ensure that they are independent and reliable—a house purchase is one of the biggest investments you are likely to make, so it is crucial that you are working with a professional who has your best interests at heart.
1. Are there buyers agents in Australia?
Although a buyer’s agent is more of a US concept, they are growing in popularity in Australia as well due to the complexities involved in buying a property.
2. What is a buyer’s agent commission?
The commission is the fee you pay a buyer’s advocate for their services. It could be a fixed fee or a percentage-based one that can go up to 3.5% of the value of the property. Most buyer’s agents also charge an engagement fee of $3,000 to up to 50% of the property price.