An increasing number of residential and commercial property buyers are paying independent advisers to help them snare their next asset.
At any given auction, among the crowd of would-be homeowners and rubberneckers, the professional buyers’ agents – or buyer advocates – can be spotted, phones glued to ears as they do their clients’ bidding.
But what do buyer advocates really do for their fee, which can be fixed or range from 1 per cent to 2 per cent of the property’s purchase price?
Melbourne buyer advocate Mal James says the main role of a buyer’s agent is to advise a client on what to buy (there used to be a perception that a buyer advocate was engaged to save money or to “beat the agent up” on the buyer’s behalf).
Now it is more common for buyers to engage their own representative in order to help them decide on the appropriate property, he says.
Janet Spencer, chair of the Real Estate Institute of Victoria’s buyers’ agents chapter, agrees.
She says consumers are becoming more cautious with their property investments, given the debt levels and capital outlay involved.
She says more and more clients are also buying for their self-managed super funds.
There are dozens of firms operating exclusively as buyers’ agents, and many other selling agents will have buying arms.
Spencer says that when she started her owner-buyers agency business 11 years ago, there were only four or five agencies offering the service. Now there are more than 45 in Victoria alone.
The SMSF dimension
Demand is expected to continue to grow as more people seek property investments for their self-managed super funds.
The advantages for buyers in hiring a professional to act on their behalf are clear – if the home buyer can afford the outlay.
Spending money hiring a buyer advocate means they save time, as the agent does most of the running around on a client’s behalf.
What do they do?
A buyer advocate searches, evaluates and negotiates on behalf of the home buyer.
They have links to selling agents and can access properties that are never advertised. Agents will generally compile a short-list of properties on behalf of clients for their consideration, can organise property inspections and can deal with mortgage brokers.
They can also help by detaching the buyer from what can be an emotional process.
The help can be costly, however. A buyer advocate receives a fee from the buyer when the property is purchased.
For full service, which includes finding a property and negotiating a deal, the cost is about 2 per cent of the purchase price. For negotiating services only, it is about 1 per cent.
Hiring someone to act on your behalf is worthwhile only if you can trust the advice they are giving you and that they will do a better job of negotiating than you will. At the most basic level, buyers’ agents should be as qualified as any selling agent in the state or territory they are operating in.
Checks and affiliations
Professional affiliations, whether it be with the Real Estate Buyers Agents Association or the relevant branch of the Real Estate Institute of Australia, can also be useful, given their requirements for membership, which can include licensing, professional education and professional indemnity insurance.
It is important to check with the agent whether they receive any payment from the seller or their representative.
Most do not and it is in the buyers’ best interest to have someone working solely on their behalf.