Should investors use buyer's agents?

But in many ways, buyer’s agents are even more important when buying an investment property. Buyer’s agents are becoming increasingly necessary for property investors in Australia.

Internal data from BuyersBuyers showed that around three in four buyers who are availing the services of buyer’s agents are property investors.

BuyersBuyers co-founder Pete Wargent said the use of buyer’s agents among the property investing community would likely continue to rise over time, especially given the unique market conditions brought about by the COVID-19 pandemic that made interstate and regional buying popular.

“Investors very often need buyer’s agents, especially when they are buying interstate in a less familiar market, with different rules and regulations,” he told Your Investment Property Magazine.
“A well-connected buyer’s agent can provide off-market opportunities and give the buyer the extra advantage in their search for the right property.”

Unicorn Buyer’s Agents director Dan Sofo shared similar insights, adding that there really appears to be an increase in the demand for buyer’s agents among investors.

“Anecdotally, during the height of the pandemic, perhaps less than 20% of our clients were investors. That has since changed with the tide shifting in the last quarter of 2021 and now perhaps 25-30% would be investors,” he told Your Investment Property Magazine.

“The average investor or homebuyer purchases five or six properties over a lifetime. A seasoned buyer’s agent purchases fifty or sixty properties a year - that is thousands of properties inspected and hundreds of hours spent negotiating with agents, and reading contracts, and building and pest reports.”

Buyer’s agents provide investors with an edge

Founder of buyer’s agency Get RARE Properties Rasti Vaibhav said buyer’s agents balance the market and provide property buyers and investors with an edge.

“The Australian market has always favoured the vendor, who is typically represented by a professional selling agent assigned with the task of achieving the highest sale prices,” he told Your Investment Property Magazine.

This, Mr Vaibhav believes, leaves some buyers underrepresented and underprepared, making them pay more than the property’s worth.

“Though property investing is simple, successful investing that meets your goals is not straightforward - investors need a trusted and knowledgeable expert who can help them find their ideal investment property that aligns with their strategy of building wealth,” he said.

The assistance from buyer’s agents is vital especially in competitive markets since they employ objective lenses that prevent investors from taking on a deal based on just emotions and enthusiasm.

“Buyer’s agents conduct extensive research, represent them, and run their due diligence to select the right property at the right location. Without getting emotional about the purchase, they proceed to secure the property at the right price and avoid costly mistakes,” Mr Vaibhav said.

How investors hire buyer’s agents

Buyer’s agents typically rely on social networks - those who are just starting out advertise heavily to get a few clients in the door.

Some of the advertising platforms frequently used by buyer’s agents include magazines, blogs, podcasts, and social networking sites.

However, as they build experience and reputation, there will be little to no need to advertise their services. The majority of their clients will come from referrals by other clients and professional associations with accountants, brokers, and financial planners.

This makes reputation a big deal for buyer’s agents — track record and testimonials make them a necessary addition to any property dealings by investors.

In his practice, Mr Sofo said he spends considerable time understanding his clients’ needs, distilling a brief, and assisting to secure finance.

“It may take weeks, or months of support and relationship building to get a buyer ready to purchase and, in that time, we’ll also ensure that the buyer is a good fit to work with us,” he said.

“We make our sharpest most profitable property deals working with clients we have a great rapport with and who trust our process from day one — if we can’t build rapport and trust early on, we would not sign them up.”

What to look for in a buyer’s agent

• Are they fully licensed?

• Are they a member of the Real Estate Buyers’ Agents Association of Australia (REBAA)?

• Ask for references or examples of results from previous clients

• How long have they been operating?

• Do they have current professional indemnity insurance?

• Do they specialise in property investment?

• Are they an investor themselves? Do they have a comprehensive portfolio?

• Does the buyer’s agent have a proven team of solicitors, accountants, property managers, builders and pest inspectors?

• Do they have access to ‘silent sales’?

• Can they help you buy property interstate?
  
  

Why pay disclosure is important

Most, if not all, buyer’s agents are working independently — this means that they operate on a straight fee-for-service agreement with their clients.

Buyer’s agents usually charge property buyers between 1% to 2.5% of the purchase price of the property for their services.

There are some cases where agents require buyers to pay a smaller portion upfront in the form of an engagement fee, with the remaining balance to be paid once a property is found and purchased.

Mr Wargent said acting only for a straight fee-for-service, with no hidden commissions ensures that the buyer’s agents protect the best interests of investors.

With this, investors need to be always wary if someone offers to act for them for free, as this is a likely indication that the agent is working for a commission.

“Often such a commission would come from the developer of new apartments or housing estates,” he said.

“We would always recommend hiring an independent buyer’s agent operating as a property insider on your side and acting solely in your best interest.”

It is crucial for buyer’s agents to disclose any incentives from third-party groups like building inspectors and removalists, but it is ultimately on the investor whether to continue their business.

Buyer’s agents — investor’s best asset

Mr Wargent said over the past two years, there has been a “race for space” among Australian property seekers, which changed the demand away from higher-density and inner-city markets. This demographic shift is something buyer’s agents can help investors be more aware of.

“Total stock listings across the capital cities are unusually low at the present time, at some 30% below the five-year average, so a clear strategy and a decisive approach are certainly needed,” he said.

“As investors, there will always be other properties and other opportunities, so if you miss out on one deal, there will always be another to look at.”

Meanwhile, the federal election, the likelihood of rate hikes by the Reserve Bank of Australia, and global conflicts can potentially pose uncertainties and have a ripple effect on Australian housing.

Mr Sofo said savvy investors and buyer’s agents are taking advantage of the market uncertainties to score sharp deals.

“Uninformed buyers, unfortunately, are probably overpaying at September 2021 prices. Right now, a property investor’s best asset is an experienced buyer’s agent who is very in the know about local sales, how long properties have been on the market, and the level of fatigue or distress there may be on the part of the seller,” he said.

Mr Sofo said buyer’s agents can help investors identify locations that are not necessarily considered “hot” by using both macro and micro lenses.

“Look at the macro factor first: location. Stick to the fundamentals — buyer’s agents have knowledge of locations that have great transport, amenities, and planned infrastructure but where supply is constrained by geography, heritage, and zoning,” he said.

“Then go micro — a low maintenance property with a good land component, a great floor plan and high liveability. Buy on fundamentals and avoid the ‘bargain mentality’,” he said.

For Mr Vaibhav, buyer’s agents help ease and even prevent challenges that could potentially hinder prospective investors from breaking into the market, including the lack of clarity and insights, inadequate borrowing capacity, absence of a favourable deal, and dealing with “pushy” sales agents.

“With affordability an issue, investors have to look beyond their neighbourhood — there are more than 15,000 suburbs in Australia and to be able to work out where to buy is a challenge,” he said.

“Some investors do not know whom to rely on when they go remote — they need a trusted partner, which is what a proficient independent buyer’s agent offers."

View the article on Your Investment Property Magazine here.