What is a buyer's agent? Are they worth the money?

Buying a home is a really big deal for most of us. It’s very likely to be among the biggest financial decisions of a lifetime.

And those fortunate enough to be able to afford property might only buy once, or a handful of times.

In a high-stakes environment with a process that can be complicated, time-consuming and overwhelming, prospective buyers often seek independent expert advice and guidance by going to someone called a buyer’s agent.

What does a buyer’s agent do?

Buyer’s agents represent the buyer’s interests in some, or all, of the tasks associated with purchasing a property. They offer a range of services, from a comprehensive start-to-finish package to a one-off task such as auction bidding, and can represent anyone from owner-occupiers to investors.

Some of their main duties include:

Clarify the buyer’s brief:

A lot of people come to us and there is uncertainty over what they can buy and what they can afford,” says Melinda Jennison, managing director of Streamline Property Buyers and president of the Real Estate Buyers Agents Association of Australia (REBAA). She says couples often have different property requirements, and buyer’s agents can help to identify their “must-haves, nice-to-haves and deal-breakers”.

Prepare for the purchase process:

Buyer’s agents help ensure the buyer has all their ducks lined up in terms of finance and documentation, and fully understands the costs and requirements associated with buying.

Research and market analysis:

Buyer’s advocates watch the housing market very closely. It is part of their job to stay up to date with recent sales results and data, and the context that surrounds them. They should have extensive knowledge of the areas in which their clients are buying, and be able to explain how current micro market conditions are affecting demand and price at any given time.

Inspect and shortlist suitable properties:

This is a particularly relevant service for property investors or clients who are time-poor or living interstate or overseas. Buyer’s agents can identify, inspect and assess on and off-market properties to make sure they meet all of the buyers’ requirements.

Due diligence:

A critical aspect of the process, buyer’s agents are seasoned property players with a knack for identifying potential red flags. They can coordinate building inspections and pest, survey and engineering reports, and conduct background research into zoning, nearby developments or any protections that could affect the property. “It’s a huge part of what we do,” Jennison says. “Buyers don’t know what they don’t know.”

Negotiation/auction bidding:

“After due diligence, we’re into negotiation,” says The Property Curator’s Brendan Clark, who specialises in Sydney’s inner west. “If we‘re looking at auction, it’s deciding the best course of action – sometimes that’s going to auction or trying to buy before auction.” Clark says he assesses the level of competition and how many similar properties are for sale to “work out where that property sits in the market and how to maximise our chances of success at a price we’re comfortable with”. Buyer’s advocates can liaise with sales agents, propose offers and conduct negotiations. Their services can include attending and bidding at auctions, and negotiating the sale terms and conditions.

Post-settlement process:

Buyer’s agents can be on hand to assist with settlement support and pre-settlement inspections,

Difference between a buyer’s agent and a real estate agent

A real estate agent, also known as a sales agent, represents the vendor. They act in the best interests of the seller, and their job is to market and sell the property. A buyer’s agent, often referred to as a buyer’s advocate, represents the buyer. A buyer pays a buyer’s agent to undertake a range of services associated with finding and securing a property.

In Australia, buyers’ agents are required to hold a real estate agent’s licence in the state/s they operate in. By law, an agent cannot act as both a buyer’s agent and sales agent in the same transaction.

Benefits of using a buyer’s agent

Save time:

Property hunting can be very time-consuming, especially when conducting thorough due diligence. In a competitive market, missing out on one property can mean starting the whole process again. Buyer’s agents can search, assess, inspect and bid on properties on your behalf. Clark says he tries to ensure his clients are not wasting their time and following the wrong opportunities. “It’s about understanding that property that you are looking at – do you have a good chance of getting it?”

Save money 

Money could be saved via off-market opportunities, strategic negotiation or tactical auction bidding. An agent’s experience and understanding of the property market and cycle could help you avoid costly mistakes.

Avoid emotionally driven outcomes:

It’s not uncommon for negotiations to break down to emotional reactivity, Jennison says. Buyer’s agents act as impartial intermediaries, facilitating objective conversations and, in some cases, making sure FOMO (the fear of missing out) doesn’t take over. “For some buyers, if they do miss out at an auction, they start thinking they’re prepared to compromise. Our job is to keep them on track. If you start to make compromises, that’s when you have buyer’s regret down the track.”

Local market knowledge:

Understanding the micro market conditions in a suburb or town will be a great advantage in both the search and purchase process. This is particularly relevant for buyers who are purchasing in an unfamiliar or new area. “It’s hard to be an expert in an entire city or region, so find an agent or agency that focuses on the area you’re looking to buy in,” Clark says.

Leverage professional relationships:

Buyers’ agents have typically worked with local real estate agents many times, building rapport and trust. This can be advantageous when putting in an offer. Clients can also benefit from access to a network of property experts, from mortgage brokers to conveyancers.

Remain anonymous:

Having a buyers’ agent act on your behalf can be beneficial for people who want to keep a low profile. Jennison says there are a lot of buyers out there with a public persona who don’t want sales agents, or the general public, to know their personal or business dealings in property.

How to choose a buyer’s agent

Searching online is an easy first step to see what agents are in your area. “You can go to Google, but those who have paid a lot for Google ads or paid extensively for SEO might not be the best in the area,” Jennison warns. 

If you can’t source a recommendation from a friend or family member, Jennison recommends asking for referrals from local real estate agents, accountants, mortgage brokers or conveyancers. But make sure to ask if they receive any financial incentive for the referral. “They might be getting a kickback,” she says. “A lot of that goes on in the industry.”

Ask about their experience and previous client testimonials. “It’s also worth asking about their most recent few client purchases to get an understanding of why each property was purchased, how the process unfolded, and how each property suited that particular client’s goals,” Clark says.

“This will help you understand how the buyer’s agent works, and give some comfort that they have the right processes in place to find the right property at the right price.”

Risks and considerations of a buyer’s agent

Always check the buyer’s agent’s qualifications and licensing before engaging their services. Buyer’s agents are required to hold a relevant license in each state in which they operate. “Some award-winning buyer’s agents are not even licensed properly,” Jennison warns. “Award-winning doesn’t necessarily mean compliant.”

Check if the buyer’s agent is affiliated with their state-based real estate institute and/or REBAA. Members of REBAA must be qualified, licenced, insured and comply with a professional code of conduct. For example, REBAA members are not allowed to represent two buyers with the same brief at the same time.

It is strongly recommended to ask if the buyer’s agent is exclusive or independent. If they accept commissions or rebates from developers, vendors, or other property-related services, it could create a conflict of interest.

Finally, Jennison says buyers should be wary of any agent who pressures them into making a decision. “The buyer’s agent is there to inform, to educate and empower their buyer,” she says. “It’s never a forced decision.”

How much does a buyer’s agent cost?

Some buyers’ agents operate under a flat-fee model, while others charge a percentage of the purchase price – usually between 1.5 and 3 per cent.

The latter option is more contentious as there is less financial incentive for the buyer’s agent to negotiate the lowest possible sale price. To combat this, some buyer’s agencies will cap the final amount at the lower end of the buyer’s budget. For example, the agent could charge a $3000 engagement fee and a 2 per cent commission on an amount up to $1.5 million if the client’s budget was $1.5 million to $1.7 million. Some agents will waive or offset their engagement fee if the purchase is successful. In this example, a 2 per cent fee of a $1.5 million purchase would equate to $30,000.

While plenty of agents have shifted to a flat-fee model to reassure buyers, Jennison says there are many reputable buyers agents who operate under the percentage fee structure. She advised buyers to have a sit-down conversation with their agent. “You need to be comfortable they are ethical and are working in your best interest.”

Under both pricing structures, buyer’s agents will typically charge an engagement fee, and a subsequent success fee if the outcome is favourable. For example, the engagement fee for bidding at an auction might be $750 while the success fee might be $500. If the buyer’s agent was the successful bidder on the property, the bill would be $1250.