What is the value of using a buyers agent? One is that it saves you a massive time of looking for a property to buy. And so having someone dedicated to that makes a massive difference. It means that you do get the best deals.
Okay, so what I’m going to talk about today is using a buyer’s agent. There’ve been a few questions in the group this week about basically why you would use a buyer’s agent. And also some details around the actual transaction. And so was asking that she has a very specific area where she wants to buy. And would there be any value in using a buyer’s agent?
So what I will talk to you about is firstly why I started using a buyer’s agent. It’s only been probably in the last 4 or 5 years that I’ve used a buyer’s agent and I now have a bit of a team of buyer’s agents and their skills vary. So depending on the sort of project I want. It’s the project that determines who I go to. But I feel like I would have thought that I would be the last person to use a buyer’s agent. Actually, I don’t know that there’s anything I wouldn’t pay for these days since I’ve become quite time-poor. And so I always thought that I was the best at negotiating my deals and I was good at it.
And so why would I use a buyer’s agent? But the reason I started to because what I found was it sort of took me forever to find a project because I was doing other things. And so that would put a big lag time in between when the last one finished and the next one started. Now, sometimes you want that lag time. Like now I’m just watching what the market’s doing. But other times you want to go straight from one to the next. And it was just taking me too long. And so I decided to use the buyer’s agent. And that’s just totally transformed my experience of renovating because I know that if I get in touch with one of my team of buyers agents I use and let them know what I want. I will have that probably in less than a month and that just makes a huge difference it keeps the flow going through on your projects so that you’re not having downtime.
The other thing is that it saves a massive amount of time because I know that when I’ve had someone looking for a property for me, it would not be unusual for them to spend most of the day in a real estate agent’s office getting the deal across the line. Now, I can’t afford to spend a whole day in there trying to fit it in with other things. And so having someone dedicated to that makes a massive difference. It means that you do get the best deals.
And the other thing is, particularly in New South Wales, there is a risk of someone picking you at the post. So having a buyer’s agent who’s going to organise the contract, come to you, get it signed, get the check for the deposit and take it over and execute it straight away. Really speeds it up and reduces your risk of being picked at the post.
GETTING OFF-MARKET DEALS
So the next thing and this is an awesome advantage to use a buyer’s agent is that you get off-market deals and that’s how you get the right properties at the right price. So the buyer’s agents keep a close relationship with the agents in the area that they work and will know about deals before the broader community knows about deals because often actually I shouldn’t say often a good agent will start talking about that property as soon as they’ve got the listing when they’re going in to have photos taken. They usually have a couple of buyer’s agents or a couple of prospective buyers with them that will go and have a look at it at that early stage. And so particularly when the market is really fast, which, believe it or not, it still is here. It’s just blowing me away. Then you want to be able to get in at the ground level so that you get first dibs on it and you get it for the right price. It hasn’t gone to auction and price blown out of the water. You’ve been able to get it, keep it contained.
BUILDING RELATIONSHIP WITH THE BUYERS AGENT
Now, this next point is something that I think is critical. Now we’ve had a few students go off and learn to be buyers agents and they have come back and told me that they cannot believe the difference in the way the agent relates to them once they say they are buyers agents. So what they’re saying is the agent opens up to them and tells some things about the property that you would never hear as a buyer, because the agent wants to build that relationship with the buyers agents because they know that they’re buying all the time. Whereas you as a member of the public, they like you may get that. Well, I certainly have that relationship with the agent that I work with, but I wouldn’t get that in an area where I wasn’t known or where I didn’t already do a lot of work. And that gives you a massive advantage because I’ll be quite upfront with the buyers agent because they’ll want that buyers agent to trust them and to keep coming back to them.
The other reason that a buyer’s agent is a good friend to a sales agent is that they will bring deals to the agents, those when their clients are selling, that if they think that an agent does a good job and they’ve got a good relationship with them, they will often refer that sale to the agent. So they have a vested interest in building their relationships. And as the buyers agent’s client, you are the one that benefits from that.
The other thing that’s another spin-off of that relationship is that you often get access to deals that nobody else has seen. So I’ve had a buyer’s agent say to me, the agent is not going to show this to anyone else until we’ve seen it. And we’ve made our decision, like, you can’t hang around. You’ve got to get in there and do it. But that’s an incredible benefit for using a buyers agent. So you’re going to get access to deals that nobody else has access to.
BUYING OUT OF AREA
The other great thing about using a buyers agent is that you can buy out of area. Now it takes at least 6 months. I actually think that’s quite conservative to build enough intel about an area to have the confidence to be able to buy a renovation project. So it’s not like you’re buying a project that you’re going to hold for several years if you’re going to buy and sell. There’s a level of risk against which you can compensate by having very granular knowledge about the market in the area. And so to do that 6 to 9 months minimum to know an area depending on how many sales. And so by using a buyers agent, it is a way to actually shortcut that process.
The other side of that is it enables you to go out of area. So you may not have the time or the patience to research your areas. You just go directly to a buyers agent. But the other thing is that you might want to buy out of areas so like I bought in Queensland, I bought in western Sydney, I bought in areas where I don’t live and work. And rather than have to go and spend a lot of time researching. Much better to use the buyers agent that’s really on point with those particular areas and knows it back to front. And Katherine’s just mentioned, and I agree with her that the agents love to talk about forthcoming sales and they do love to share information that they shouldn’t. They love to overshare. So but they will do that with the buyers agent where they will probably won’t do it with a member of the public. And in fact I know that they won’t. And in fact, it’s sort of it’s a breach of their code of conduct if it places their seller in a poor position.
So the other thing I wanted to talk about is so firstly, I was asked if you’re buying in a very limited area, just a couple of streets. Is it worth getting a buyers agent? Yes, it is worth getting a buyer’s agent. So what they will do is actually go directly to owners in the streets that you want to buy in and knock on their doors and talk to them about the fact that they have a potential buyer and where someone might think. You might think that someone wouldn’t actually consider selling. Just because someone knocked on their door. Often, that’s sort of the trigger for them to actually start thinking about it. I think often people got one foot in the camp sort of on an ongoing basis. And if someone comes along and says, “Hey, I’ve got a buyer for your property, are you interested in selling? Then it just completely changes the game. So it definitely would be a good idea to do that.
If you don’t you’re not wanting to spend the money on a buyers agent. And you’ve got a sales agent that you trust. And so for those of you who do our training, what you would know that what we do is research the sales agent in the research period. Not when there is something of benefit for them, because it’s always hard to see the true person when there’s a carrot in front of their nose. So it needs to be someone that you really trust that has a level of integrity that you can rely on, then you could probably get that person to investigate as well.
DUE DILIGENCE IN SELECTING A GOOD BUYERS AGENT
Now, a couple more things I want to talk about with buyers agents. There are buyers agents, and there are buyers agents. And I have a list of stories as long as my arm of people that have not done good due diligence on selecting their buyers agent and it has ended up in not a good outcome. Things like one of my students not under my watch, of course, but had a buyers agent help her buy 2 investment properties. Both of them were absolute lemons. One of them was in Moree on the bad side of town. So basically the windows and the walls were getting belted out on a regular basis. And so that wasn’t a great outcome. And she ended up having to sell it.
I had another instance where a young woman came and did our training and her boyfriend decided he didn’t need it, which was fine. He went on and used the buyers agent who was sort of a mate and bought a property that he was going to build a house on and after the contract. So the contract was subject to finance, but it wasn’t subject to due diligence. And after each day, it went unconditional. He discovered that the property had a sewer right running right through the middle of the property. And like when you’re using a buyers agent, that’s just unforgivable because they need to be across the basics of due diligence. And that is due diligence 101. And so you really do need to do decent due diligence on the buyers agent before you use them. You need to know that they have the same values as you have because there’s a lot of shonky people in the industry and that they know their stuff.
One of the ways to do that is ask them. So depending on what your strategy is, ask them how many of those properties they have themselves. Because that will tell you how competent they are as an investor. And so whether or not that’ll be one way of measuring how good they are and whether you can work with them.
ANOTHER SET OF EYES OVER YOUR DEALS
Now when the other thing that I forgot to mention in the benefits is it’s another set of eyes over your deal. So you really can’t have too much expertise when you’re making the decision about the property to buy. Especially if you’re buying a renovator. And so having another set of eyes over your deal is always a good way to go because if you tend to get quite emotional with properties and a lot of people do. And there is absolutely nothing wrong with that. As long as you’ve got checks and balances in place to make sure that when you buy a property that you don’t overpay for it. You buy the right property. I know a lot of the buyers agents that when we work with that we work with will actually say to a client that you’re planning to pay too much for that property and that’s because it’s driven by emotion so that they will pull it back and make sure and look after your interests.
Now, one of the questions was what do buyers agents charge? And that depends a bit. Most charge between 1.5% and 2% and of the property value, and they will expect, they will require a retainer upfront and usually, that’s at least 25%. Some buyers agents want it all up front and but it just depends. Now, I have no problem paying a buyers agent because every property that I’ve sourced through a buyers agent, I’ve still been able to make my profit and pay their commission. I look at it as being a tool to help me in my business. It’s the cost of doing business. And if you’re going to be serious about what you’re doing, that’s just one of the professionals you need. You’ve just got to look at it like that. You wouldn’t go into business without a lawyer or an accountant. When your business involves property, unless you are, you’ve got all the time in the world and you’re only going to buy one property every 2 or 3 years. And you do feel quite confident about negotiating then maybe. But if you’re serious and you’re wanting to do deals on a regular basis and grow your wealth at a reasonable speed, a buyers agent is an essential part of the mix.
Now, one of the traps that renovators, particularly because they like DIY, fall into is they’ll engage a buyers agent and then they’ll go and do the search themselves. You really have to make a decision. Are you going to engage the buyer’s agent? Or are you going to do it yourself? Because it’s a bit like being half pregnant. You can’t really do half the job, because what happens is the minute you press the button, that business goes into overdrive. So their teams get into action. They start contacting all their contacts that might have properties that work for your needs. They do a bucket load of research and they spend a lot of time and energy on finding your property. So if you then go out and look for a property yourself and you find one, and then you say to them, “No, I don’t need you.” You just can’t do that because you’ve engaged someone. You’ve gone into a contract, you are contracted for the full amount of money. So if you’re wanting a different service, one where it’s not a full service, you need to be really clear upfront so that you can work with the agent to create a service that’s going to work for you. Some will. Some won’t. Some you can get a buyer’s agent just to bid for you at auction. If you want to find the property and get the buyers agent to negotiate. I personally wouldn’t do that. But if you want to do that, you can. But yeah, that’s my view on using buyers agents.
So I’ll have a look. And so if you’ve got any questions, let me know and I’ll answer them while I am here. Oh, someone also mentioned to me the other day, I can’t remember who it was that the buyers agent, they were wanting to buy reno through a buyer’s agent and the buyers agent wanted to stitch them in to claim a percentage of the sale when they sold it. I would not go down that path. I think you pay the commission to source the property, but you want to keep control over how you sell the property. Now, they would have to be some pretty amazing benefits to go into an arrangement like that. And I would be really reluctant to do it.
I think I have covered all the issues that came up in the group this week. Now, Meg says, “Is it better to have a buyers agent in the area that they are offering or an agent can find properties? So I do work quite closely with my local agent and so he does find properties for me. But I actually prefer to have a buyers agent because a sales agent’s code of conduct requires him or her to be loyal to the vendor. And so by law, they’re really not supposed to give you advantages. They will a bit, but they’re really restricted by the law. So I personally think you are better with the buyers agent because you are paying them to represent you. And so they will sort of go in and bat for you. And so they’re not bound by any legality in that way or code of contact. Of course, they have their own code of conduct. But it’s really pitched towards looking after your interests.
So, yeah, that would be my response to that. Okay. Well, I think that I’m just about done for today. And I guess something I should mention that I’ve got coming up is another buyers agent function is seller’s advocacy. And I have a podcast episode coming up that talks about why you would use a seller’s advocate. Now you can use a seller’s advocate and it doesn’t cost you anything. And I personally think unless you are really, really confident and not many people when they go to market are confident even I feel quite anxious when I take a property to market because there’s that sort of you feel like you’re out at sea. And so I think that it’s definitely something that you need and can do with some extra support. I think I’m going to finish up now and hope you’ve found that it’s a value. And I will see you next week. Same time.