A buyer’s agent (or buyer’s advocate) can be a valuable resource when it comes to finding your dream home or investment property, as they are designed to extract home buyers the best value when purchasing property. But understanding the buyer's agent cost is crucial. In Australia, you can usually hire these licensed professionals to perform one of three main services:
- Full search
- Appraisal and negotiation
- Bidding at auction
But how much do buyer’s agents charge for these services, and are they worth the investment? Below, we’ll explore what’s involved in each and the different pricing models involved.
Understanding Buyer’s Agent Services
What is a buyer’s agent?
A buyer’s agent is a licensed professional who represents the buyer in a real estate transaction. Unlike a seller’s agent, who works for the vendor, a buyer’s agent works exclusively for the buyer, providing expert advice and guidance throughout the property buying process. Their primary goal is to help their clients find and purchase their ideal property at the best possible price and terms. From helping clients conduct a thorough property search to negotiating the purchase price, a buyer’s agent is dedicated to ensuring a smooth and successful property purchase.
Benefits of using a buyer’s agent for investment property
Using a buyer’s agent for an investment property can provide numerous benefits that can significantly impact your investment’s success. Here are some key advantages:
- Access to off-market properties and exclusive listings: Buyer’s agents often have access to properties that are not publicly listed, giving you a competitive edge in finding unique investment opportunities.
- Expert knowledge of the local market and current trends: With their in-depth understanding of the local market, buyer’s agents can provide valuable insights into property price trends, helping you make informed decisions.
- Ability to negotiate the best price and terms: Skilled in negotiation, buyer’s agents can secure favorable terms and a lower purchase price, potentially saving you thousands of dollars.
- Time-saving and stress-reducing services: By handling the property search, inspections, and negotiations, a buyer’s agent can save you significant time and reduce the stress associated with buying property.
- Objective advice and guidance throughout the process: A buyer’s agent offers unbiased advice, ensuring that your investment aligns with your financial goals and objectives.
- Potential to save thousands of dollars on the purchase price: With their expertise and negotiation skills, buyer’s agents can often secure a better deal than you might achieve on your own, maximising your investment’s profitability.
Benefits of using a buyer's agent for your own home
It's a common myth that buyer's agents are only suited to investors. If you're buying a home to live in, there are plenty of very good reasons you want to ensure your home is a sound investment.
- Great investment: A buyer's agent can help ensure that your purchase is worth the money you're investing into it. Your financial future can be transformed if you choose the right home and buy it for the right price.
- No hidden defects: A buyer's agent is an expert at commissioning and reviewing the professional reports you need to look under the hood. It's better to know if an apartment you're considering has an adequate sinking fund, or if there are any structural issues with your home.
- Without time and stress: the right buyer's agent will help you focus your search so that you're inspecting properties that are suitable, within budget. This market knowledge has a huge impact on the final price and your experience of buying a home.
- Even the playing field: sellers employ qualified, experienced real estate agents to extract the highest possible price from home buyers - wouldn't you want someone equally qualified and experienced professional representing you in negotiations? The final purchase price often comes down to smart appraisal, expert negotiation skills and experience.
Full service: 1.5% - 3% of the purchase price
This is the most expensive level of service an Australian buyer's agent offers, as it involves managing the whole process of purchasing a new home on your behalf. A full-service package will typically include:
- Discussing the type of property you want
- Helping you to source properties within your price bracket and creating a shortlist - some specialise in creating a list for you, the best services help you understand what to filter for.
- Arranging inspections and appraisals
- Performing thorough due diligence
- Arranging building and pest inspections and strata reports with independent, trusted professionals
- Negotiating with the real estate agent once the right property has been found
- Bidding on your behalf if the property goes to auction
- Handling all the paperwork involved in the property purchase
- Connecting you with industry professionals such as conveyancers and property managers
This service is especially useful for first-home buyers, property investors looking to buy in a different state, and those whose work or other obligations don't allow enough time to conduct a thorough property search themselves.
Buyer's Agent fees will vary depending on the location and your specific requirements. In metropolitan areas such as Sydney and Melbourne, the average fee will range from 1.5% to 3% of the purchase price + GST. In other areas, the fee may be lower.
Full service: flat fee model - OwnHome Example
OwnHome's Buyer's Agent service is a full service Buyers Agency with a fixed fee.
The service includes everything listed above, with some additional benefits:
- Custom platform to save, manage and track properties
- All agent communication handled - you never have to speak with a real estate agent
- Deep data driven property, suburb and state analysis to help with appraisal, home valuations and investment decisions
- Fully refundable initial engagement fee so that you don't spend a cent on the service if you end up not purchasing.
- Experienced buyer's agents, who have helped hundreds of clients purchase.
The flat-fee model is great for homebuyers as there is no incentive for the buyer's agent to increase the purchase price in order to increase their commission.
Appraisal and negotiation: 0.9% of the purchase price
Some homebuyers only engage a buyer’s agent to appraise and negotiate a sale price for a property. If you’ve got your eyes on a new home, an agent will inspect it in person and take note of the following:
- The property size
- The number of rooms and bathrooms
- The condition of the property
- Fixtures and fittings
- The location
- Proximity to schools, shops and public transport
They will then take this information and compare it against similar homes that recently sold in the area. Once broader real estate trends are factored in, they can suggest a fair market price, which can be used as the basis for negotiations with the vendor.
A buyer’s agent typically charges a percentage of the property purchase price (usually around 0.9%) + GST or a fixed fee model equivalent for an appraisal and negotiation service.
Auction bidding: $500 attendance fee
Some property buyers only need a buyer’s agent once they’ve found their ideal home and need someone to represent them at the auction. This can remove much of the stress and put you in a prime position to beat other bidders.
Their emotional detachment can also be valuable in such a high-pressure setting. By handing over bidding duties to the agent, you can avoid getting swept up in the excitement and offering more than a property is worth. An experienced buyer's agent can navigate the complexities of auction bidding, ensuring you get the best possible outcome.
The cost of an auction bidding service will usually be much cheaper than other buyer’s agent services as there is much less work involved. They typically charge an upfront fixed fee of $500 + GST to attend and a $1,000 + GST success fee.
How Buyer’s Agent Fees Work
Upfront costs and retainers
When engaging a buyer’s agent, it’s important to understand the fee structure, including any upfront costs or retainers. Some buyer’s agents may require an upfront cost or retainer, which serves as a commitment fee. This fee is typically deducted from the total fee payable upon purchase and can range from 20% to 50% of the buyer’s agent fee. It’s usually non-refundable.
In some cases, buyer’s agents may also charge progress payments as they reach particular milestones in the property search and purchase process. These payments ensure that the agent is compensated for their ongoing efforts and commitment.
A reputable buyer’s agent will provide transparent and competitive pricing, clearly outlining all costs involved in their services. Before engaging a buyer’s agent, make sure to discuss and understand the fee structure, including any upfront costs or retainers, to ensure there are no surprises along the way.
Costs and retainers - OwnHome Example
OwnHome's Buyers agent fees are fixed, to give you peace of mind:
- Refundable retainer: $3,000 + GST - this is fully refundable until exchange.
- Success fee: $9,000 + GST - payable on exchange.
- Inspection report costs: paid to the inspector, usually a few thousand dollars over the home hunt.
Are buyer's agent costs tax deductible?
If you’re a property investor, check with a tax advisor before making a purchase decision based on this information. However, the total cost of using a buyer’s agent, including buyer's agents fees, will usually be tax deductible. That means if you sell later, the fees can increase the cost base of your investment property and reduce the amount you pay in capital gains tax.
If you’re an owner occupier, buyer’s agents’ fees are not tax deductible.
Is the buyer's agent fee worth it?
The total fee of hiring a buyer’s agent can seem high at first glance, but if they can negotiate a lower purchase price — and the savings are more significant than their buyer's agent's fees — then they more than make up for the price tag.
An experienced buyer’s agent can also save you time by doing the legwork of house hunting for you. No matter if you want a family home, you’re relocating interstate, looking for an investment property, or unsure how the home-buying process works.
