If you’re considering using a buyer’s agent (also known as a buyer’s advocate) for your next property purchase (and you should be, here’s why), it’s likely that you’re wondering how much it’s going to leave you out of pocket?
Well, how long is a piece of string? Multiple factors can determine how much you’ll end up spending on a buyer’s agent.
Don’t let this deter you from making this life changing decision. Here’s what you need to know when weighing up costs.
It’s most common for buyer’s agents to offer clients the following pricing models.
For a buyer’s agent that is providing you with a full service offering, managing every step of your property buying journey, it’s likely they’ll charge you a percentage fee of the property’s sale price. This will vary from agent to agent, but can be up to 2.5%, plus GST. Remember, this commission may change depending on the type of property they’re buying and the level of service provided.
A fixed fee model is when a buyer’s agent will give you a flat rate cost for a service. This is most commonly applied to select services, as opposed to their full service offering. For example, if you need a buyer’s agent to attend an auction on your behalf, they’ll likely charge you a flat fee for this.
For both commission and fixed fee there is typically a retainer that is charged up front which can vary between $3K and $5K depending on the budget of the client.
The remainder of the fee is then payable on exchange. For example, if the total fee is $15K, $3K is paid up front as a retainer and $12 is payable when you go unconditional and exchange contracts.
Why does it cost so much?
What might seem like a large financial investment at first, is not really not the case. A buyer’s agent acts on your behalf to get you the best outcome. They’ll work tirelessly, taking on many of the jobs that would normally consume a large amount of your time.
Not only can the time that a buyer’s agent saves you offset their cost, but they could secure you a great purchase price, saving you thousands and thousands of dollars.
Everything is negotiable
As a first step, be open in your discussion when selecting a buyer’s agent and have a clear budget in mind. Buyer’s agents can tailor their offering based on your requirements and may be able to accommodate accordingly. In addition, they may be able to offer you a discount as a first time customer. Don’t be afraid to be open in your communication.
The services provided by a buyer’s agent are going to have a significant impact on how much it ends up costing you. If you’re looking for a high level of involvement that goes above and beyond the standard offering, then it’s likely this will be reflected in the commission rate you pay.
If you’re really limited by budget, start by engaging a buyer’s agent to assist with the areas you need most help with. This is a great way to test the waters and soon enough you may find yourself wanting help with all areas of your property buying.
The costs you pay for a buyer’s agents can also be dependent on the complexity of your purchase requirements. Finding and negotiating a residential property can be very different from what’s involved with a development site.
A buyer’s agent should be upfront with you and clearly outline their fees and how they differ based on the requirements being put forward.
Buying property is a game and it’s often hard to know whether you’re getting the best deal or not. It’s a buyer’s agents job to act on your behalf to secure you the best possible outcome.
If there’s a property that you’re interested in that is overvalued, they’ll be upfront and tell you this. If they’re going into an auction batting for you, feel secure knowing that you won’t be spending more than your agreed budget.
The money you invest in a buyer’s agent is money that you may get back through an excellent purchase price you may not have otherwise achieved.
When buying an investment property, clients may be able to claim their buyer’s agent fee as part of the cost base, reducing their capital gains tax when it comes to sell. Speak to your tax advisor to find out what tax advantages are open to you.
Become a buyer’s agent today
If you’re buying a lot of property or just have a general interest in the market, you might like to consider becoming a buyer’s agent yourself.
The Buyer’s Agent Institute offers affordable online training that will empower you to achieve more. Watch our free training to learn more.
Finding an agent
Ready to find yourself a buyer’s agent to start looking for your next dream property purchase. Use our agent directory to get started.