In the real estate world, there seems to be a never ending list of brokers and agents that can help you out with the buying and selling of property. It is very common to use a real estate agent to help you sell a property but what about when you are buying?
At first, it might seem a little crazy to hire someone to purchase a property for you, especially if you are paying them a fee or commission.
But can a buyer’s agent add value to your purchase?
Leveraging Experience and Knowledge
If you are new to property investing, there is a lot of knowledge and opinion out there about what to buy and where to invest. If you don’t already have experience, it can be tough to make a confident decision.
A good buyer’s agent can use their experience with buying and selling property to help you get a better deal, possibly below market value and within the criteria that you specify. Not only that, but they should already have an established network of contacts that can help source property before it is even listed to the public.
According to Chris Gray of Empire Property Investments, up to 40% of properties are sold before being shown on the open market. This represents a lot of opportunity that most of us never get a chance to see.
An agent can also have an established team of experts to use such as building inspectors, pest inspectors, valuers and tradesmen to help you with your purchase so you are not left running around trying to find reliable people.
If you work long hours or run a business, it can be difficult to find the time to search for good property, especially if you are investing interstate. A buyer’s agent will do all of the leg-work and provide you with a shortlist of properties for you to choose from.
They handle all of the negotiations and if you have found a reliable agent, you can follow through with your investment purchase with hopefully very little stress.
What Do They Charge?
Based on my research, I have not found a consistent fee structure used buy buyer’s agents. Some will charge an agreed fixed fee, some will charge a commission based on the purchase price of the property and I have even seen one who charges the vendor directly (that is, they take a cut of the normal sales commission).
The fees will also depend on what other services the agent offers you, with some agents being experienced investors, they can help you out with other aspects of your property purchase.
Personally, I’m not sure I like buyer’s agents charging commission based on the purchase price. I may be missing something, but this seems counter-intuitive since they should be trying to get the lowest purchase price possible, yet this would drive down their commission.
It works well for seller’s agents because they are working towards a higher sales price, not a lower one.
So just like any other person who does work for you, whether it be a mortgage broker, plumber or buyer’s agent, you will want to choose carefully and spend time getting recommendations.
Mistakes in property investment can be very expensive, but if you have the right people guiding you, it can take a lot of risk out of the process.