Choosing the right buyers agent for your investment property

How to choose the right buyers agent for your investment property?

The buyer’s agent industry has experienced significant growth over the last five years due to increased demand from property investors who want to outsource the process of buying an investment property to a professional.  Australia typically tends to follow the trends in the US where about 50% of all buyers use a buyer’s agent.  In a recent survey, it found that nearly 34% of buyers are considering using a buyer’s agent.  

The current cost of using a buyer’s agent can range between $10,000 to $25,000 for residential and commercial properties and choosing the wrong buyer’s agent can be a costly mistake which can set you back rather than move you closer to achieving your property goals.

Therefore, the question of how to choose the right buyer’s agent has become increasingly important.  Below is a list of questions you should consider asking your buyer’s agent to determine whether they are the right fit for you and your objectives.

How are you getting paid for the service you provide?

Buyers agents generally work on a fee for service basis and will charge you an initial engagement fee as a deposit and then the remaining balance of their fee is paid on settlement of the purchase property.  

However, there are some buyers agents in the industry that are actually paid by the developer or vendor and they will focus on promoting off the plan or brand new properties to you while emphasising that they provide a fee free buyers agent service.  Although there is nothing illegal about this, it’s important you understand what the conflict of interest is so you can assess whether the buyer’s agent is looking after your best interest or the interest of the developer.

It’s also important to ask whether the buyer’s agent gets paid or receive any financial benefits or kick backs from the real estate agents they work with as some buyers agents will advertise that they are able to source off-market opportunities however, they may just be promoting specific properties from selling agents that they have a financial relationship with and not sourcing the property specifically based on your needs and objectives.

It’s also very common for buyers agents to receive referral fees from other professional service providers they recommend.  For example, your buyers agent will recommend their mortgage broker, solicitor, property manager, building and pest inspector the list goes on.  

What’s important is to ensure the buyers agent discloses to you any kick backs or referral fees they receive so there is transparency and avoid any perceived conflict of interest.  This allows you to make an informed decision whether you wish to use the recommended professionals or you choose to find your own.

As a client, who will I be working with in your company?

The reason this question is important is because some buyer’s agencies focus heavily on their marketing and use their founder’s personality as the main person to attract customers.  However, once you have engaged them, you are then passed onto someone else who may be more junior or not have as much property investment experience that ends up assisting you from then on.

You should also clarify and confirm who will be doing the actual work of understanding your objectives, determining a suitable investment strategy, researching and sourcing the property, negotiating the purchase and managing the purchase process all the way to settlement and beyond.

Just make sure you set the right expectations and don’t fall into the trap where you approach an agency because their founder has a multimillion dollar portfolio and a huge personality in the industry, and aftewwards you only end up getting a fiften minute zoom call and never hear from the person again while immediately being outsourced to their team.  

What is your agency’s specialty and value proposition?

This questions is to help you as a client understand what is the agency’s unique value proposition.   It’s important to understand that it’s extremely difficult to do everything well and be everything to everyone.  Therefore, some agencies will specialise in residential while others specialise in commercial.  There are sub-specialisations such as specialising in cashflow strategies, or capital growth strategies, or focus on regional properties over metro properties etc.  

By understanding what the agency does best, you can then assess how well it’s aligned to your personal property goals and objectives.  There is no one size fits all so 

How do you conduct your research and source your potential properties?

It’s important to understand the level of research and analysis the agency conducts to determine the suitability of properties they recommend.  At the same time, you want to be working with a buyer’s agent that will actually visit the locations they are buying properties in.  They don’t have to be on the ground every day or extremely well-connected, but they need to be on the ground regularly in order to understand the area they’re recommending, speaking to the local agents to initimately understand the local real estate market.

There is no perfect buyers agent and there’s no guarantee that they will help you find the best investment grade property just because you are using a buyers agent.  Most of the time, a buyers agent will have access to industry tools and software that allows them to quickly and accurately summarise and amalgamate multiple data points to shortlist the most suitable locations and property types.

How do you prefer to communicate and what is your capacity?

Setting clear expectations in the very beginning of the process will ensure the buyers agent is accountable and they do what they promise.  Something as small as understanding how the buyers agent prefers to communicate can ensure you have a positive experience and that the communication preference aligns with your own.

For example, potential buyers agents may prefer to use the phone to communicate, but you are often not available on the phone during work hours and you actually prefer emails rather than phone calls.

Many buyer’s agents will try to take on as many clients as they can but great buyer’s agents will ensure they only take on a limited number of clients because they understand their own capacity and want to avoid sacrificing their quality of service.  So it’s worth asking the question to understand the buyers agent’s capacity so you can select the right buyers agent for your needs.

How long does the process take from start to finish?

The buying process can have an impact on the investment decisions that you make and timing in this area is very critical and can make all the difference, especially in a rising property market fueled by strong demand from buyers and investors.  

Therefore, you should always ask how long on average the process takes from start to finish to find the right property. 

If the buyers agent cannot give you an average timeframe, you can always ask specifically about the average timeframe of their last five to ten clients to get an understanding.

Conclusion

Choosing the right buyer’s agent is hard, but choosing the wrong buyer’s agent is can be financially devastating and move you further away from your financial and property goals.

As the buyer’s agent industry matures, we should also see more support from the industry bodies such as property investment professionals of Australia, real estate buyers agents association, and the relevant state based real estate institutes to ensure that all buyer’s agents will give their customers the right advice and service.  

I hope this article helps you choose a buyers agent that’s right for you so you can buy a property that’s suitable for your financial needs.