Finding the perfect property

A good buyers agent can take the pressure off time-poor real estate investors, but is it true they can also save you bundles of money? Bronwyn Davis examines these issues in the API Magazine April 2007 edition.

Most of us wouldn’t buy a used car without having a qualified mechanic check it out first to ensure it’s not a lemon, so should the same rule apply when you’re purchasing an investment real estate property that costs hundreds of thousands of dollars?

Buyers agent are an evolving breed in this country, whereas in the United States they’re commonly employed. Patrick Bright, buyers agent for EPS Property Search in Sydney, observes, “The real estate industry only really started there in the 1980s. So in only 25 years it went from where Australia is today to almost two out of three transactions involving a buyers agent acting for the purchaser.”

Although the residential property market is only really now being introduced to the concept of buyers agent, Angus Raine, CEO of Raine and Horne, suggests, “I’m originally from a commercial background and the phenomena of using a buyers agent consultant in commercial property was quite common about 15 years ago.”

Buyers agents in real estate investments are partaking in more real estate transactions every day, particularly for investments. In fact, there’ snow a governing body for buyers agents to regulate the industry. The Real Estate Buyers Agent Association of Australia (REBAA) was founded in 2000 to raise the profile of the industry and establish guidelines for the professional conduct of agents.

What is a buyers agent?
Queensland based buyers agent Scott McGeever fro Property Searchers says, “A buyers agent works wholly and soley on behalf of the buyer. They’re engaged to find specific properties for buyers and negotiate the best price and terms for them.”

A good buyers agent in real estate will listen to their clients’ needs before scouring the market for the perfect property. David Devenish, secretary of REBAA and Perth-based buyers agent, explains, “A buyers agent can provide a potential purchaser with advice about tips and traps, what to look out for and possible areas that might suit their requirements for either property investments or owner-occupation.”

Devenish says the primary benefit of employing a real estate buyers agent is that there’s no conflict of interest, “which is rampant in the real estate industry.” He says, “Purchasers seek advice from people who really don’t have their interests at heart because they’re receiving commissions from vendors or developers.”

Buyers agents in real estate property investing not only research the market an investor is interested in, they can also arrange inspections, deal with the selling agent on the buyers’ behalf, organise necessary building and pest inspections, bid at auction or negotiate a private treaty sale and generally attempt to secure their client a deal that will be profitable in the long term.

Because you’re relying on them to find and obtain the best possible deal on your behalf, buyers agents need to have a thorough knowledge of not only the local property market, but also how sales agents work, how vendors think and how to negotiate effectively.

At present, obtaining the qualifications to become a real estate buyers agent is simply a matter of undertaking a sub agents or full licence course, depending on the state. McGeever claims this is worrying because real estate property investors, whose financial commitment to the property they buy can make or break their portfolio, are making decisions based on information from their buyers agents.

He says, “It’s different to a real estate agent who relies ont eh market to determine the best price for a property they’re selling. A buyers agent has to have a really good idea about the market real estate and if you get it wrong you can cost someone thousands.”

Bright recommends you look for someone with at least two years’ experience as a successful selling agent and proven negotiation skills. He explains,`if you want to outsmart a selling agent you need to have walked in their shoes to know what really presses their buttons.`

The Cost
Fees for employing the services of a property buyers agent vary depending on the exact nature of the assistance you require. If you`re simply seeking advice you`ll often pay a small upfront fee, however if you want the buyers agent to research the real estate market, find your ideal property and negotiate the contract price and terms (including bidding at auction where necessary), you will generally pay a buyers agent commission fee.

This can be anywhere between 1.5 to 2.5 per cent of the final purchase price for the property, plus GST. Some buyers agents prefer calculating their fees and charges in this manner, while some prefer an upfront fee. Bright breaks down the costs for a buyers agent a little more specifically: If you want to find the property yourself and have a buyers agent research and negotiate the purchase for ou, you`ll be up around 1 per cent of the estimated purchase price. For bidding at auction you`re likely to pay anything from a flat fee of $500 up to 1 per centof the purchase price upon success. Essentially, as with any industry, you get what you pay for.

And if you`re still not convinced that a buyers agent might just make good investment, McGeever notes: The fee for a buyers agent can be used to reduce capital gains tax on the asset as it is considered a capital cost in the acquisition of the property.