Is a buyers agent actually worth the money?

In Australia, most properties are sold through real estate agents who charge the seller a commission for their services. Fair enough. It's that agent's job to find a buyer at the maximum possible price.

But if you are a buyer, that job is in direct conflict with what you want. While the real estate agent selling the property may seem helpful and friendly, they are not acting in your best interests. In fact, it would be a breach of their obligations to the seller if they were.

Buyers, in the main, go through the demanding process of acquiring a property on their own, with assistance from a conveyancer only after the purchase has been made. Does this sound like an uneven playing field?

That's where buyers agents come in. They are licensed agents who are employed by the buyer rather than the seller. While only about 3% of properties bought in Australia involve a buyers agent, their use is increasing.

Where can buyers agents add value?

Apart from having someone in your corner, a good buyers agent can do much more to ensure your purchase is successful.

For starters, they should have a good idea of what properties are worth in a particular market. A good buyers agent can work with you to identify what you want, set your budget and identify properties that fit your requirements.

They can assess the property so that you don't have to waste your valuable weekends inspecting places that sound good but don't fit your needs.

They can help with the due diligence on a property - coordinating building inspections, and survey and engineering reports. They can also research potential issues such as zoning, nearby developments or other matters that could affect the property.

Increasingly, Australian investors are prepared to look outside their own area, investing interstate or in a different part of their State. Using a local buyers agent who understands that market can ensure you are getting good local information. As real estate laws are State-based and may be different from what you're used to, buyers agents can help to minimise the risks.

They can also have relationships with developers and real estate agents, which may give them early access to suitable properties or off-market opportunities.

Buyers agents can negotiate on your behalf or bid at auction if you are unsure of doing it yourself. They can also work with you to ensure that you have everything lined up before purchasing, so you don't risk losing the right property when it comes along.

How much does a buyers agent cost?

As with agents acting for sellers, fees can vary.

According to the Real Estate Buyers Agents Association of Australia (REBAA), for the full service - searching for a suitable property, inspection, due diligence and negotiation - the industry average fee is between 2% and 3% of the purchase price, plus GST and an engagement fee to get started. Some can charge a flat fee based on the purchase price and an engagement fee.

If you only want to use the buyers agent for specific tasks, such as negotiating on a property you have found yourself or attending an auction on your behalf, the fees can be tailored to suit.

What do you need to watch out for?

Because real estate legislation is State based, any buyers agent you use should be licensed to operate in the domain that you're looking to buy in. Some buyers agents are national but still need to be licensed by the relevant State. You can check that they are licensed and have insurance through the State's fair trading office (or equivalent).

According to the REBAA, you should also make sure the agent is acting for you and not getting a kickback from developers or other agents. It says its members are exclusive buyers agents, which means they only act for the buyer.

It recommends you look at a prospective buyers agent's website to see if they sell real estate and question them about possible commissions.

It's also worth paying close attention to fees. There is an argument that a commission-based fee, while common, isn't in your best interest because it creates a disincentive for the agent to negotiate the lowest possible price. Some agents will cap the final amount as a percentage of the lower end of your budget. Or you may agree on a fixed fee.

The REBAA says it has also seen a rise in 'volume-based' buyers agents who are more interested in collecting upfront payments from clients than genuinely trying to fulfil their brief.

"I heard of a sales agent who received a 'shopping list' from a volume buyers agent, which simply outlined the types of properties they needed to satisfy the dozens of clients they were supposedly representing," says REBAA president Melinda Jennison.

"Buyers probably have no idea that the person they have already potentially given thousands of dollars to is doing very little work on their behalf and is often just approaching sales agents to see what listings they have on their books."

She says one of the most important questions to ask is how many buyers the agent currently represents. They should work with a limited number of clients. "[And] working with clients who have the same briefs is unethical, because how on earth would they determine which buyer deserves which property - unless it was influenced by who has paid the highest fee or who is prepared to make the quickest decision," she says.

"Consumers should also ask how a buyers agent sources properties for their clients, with a big, red flag being those who say it's always 'off market'. This is not only highly unlikely, but 
those properties often require a premium to be paid."

Did you know?

In the US, sellers have typically paid two commissions - one for selling the property and another for dealing with the buyer. Changes will now require buyers to pay their

own commissions.

What is the best-case scenario?

In many ways, having someone squarely on your side in a property transaction can have benefits - whether it's convenience, negotiating experience, property appraisal or just guiding you through this major investment.

And the worst-case scenario?

The potential downside is that the wrong buyers agent could end up costing you more for little or no benefit.

What is the wild card?

Demand for buyers agents depends to some extent on the state of the property market. They are more likely to be used in a heated market when finding and securing a desirable property is harder.

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