Can’t anyone buy a house? Are buyer’s agents worth the commission? Buyers and investors alike are looking for ways to get a great deal on real estate making it more affordable to own property. So can buyers agents bring value to the buying process? We talk about the pros and cons of using a buyers agent.
Negotiating A Property Purchase | Transcript
00:10: Welcome, welcome, welcome to the Property Investor Podcast. This podcast is designed for anyone who wants to excel in real estate investing. We’ll help you build the direction and strategy necessary to thrive in property investing. I’m your host, Mark Ribarsky. I’m one of Melbourne’s leading property advisors. Before we get started, make sure you don’t miss an episode. Click the Subscribe button now.
00:31: Today we’re talking about buyer’s agents. Do they really save you money? I mean, can’t anyone really buy a house? So we’ll be going through the pros and cons of using this kind of service and see if it’s something that really suits you.
So let’s look at some of the pros of why you would use a buyer’s agent. Firstly, buyer’s agents, when they’re looking at property, they’re thinking about resale. They are thinking about how tenants would respond to this property. They’re thinking about how buyers, future buyers would respond to this property. And I do understand that many buyers out there aren’t investors. But the property that you’re buying will be on the market one day. One day you will be upsizing, downsizing, doing something to change property. And when you approach the market, this is where one of the future benefits of using a buyer’s agent really plays in.
01:26: So how does a buyer’s agent know what a better quality house is? Look, the best way to put it is, they’ve just looked at so many homes through their career that it’s just second nature. So me, for example, I’ve been a real estate agent for a number of years, and now I own my own buyer’s agency and I’ve looked at thousands of properties over time and the second I walk into a house, I know what a good and functional floor plan is.
I know how neighboring properties can impact property value. I understand the layout and shape of a block of land. If there’s too much of a hill on a block of land, how that impacts value and how that can impact a house structurally as well, if it’s not built the right way.
02:06: I’ll give you an example. I was looking at a house in Eltham for one of my clients. You can Google this address, it’s 6 Kent Hughes Road in Eltham. Now, it was an architectural design home. It was probably just over $2 million worth, or that was the asking price anyway. My clients were absolutely in love with it. And I tended to agree when I looked at the photos. The house looked amazing.
But upon inspection, my feedback was, “Look, half the house when you walk in the entry, the living areas, they were fantastic. And that’s where all the effort and big spend has gone into. Into creating that beautiful atmosphere. But, on the negative side, the other bedrooms, and the second and third living areas, they had really low ceilings. Very low levels of insulation, which would have caused havoc on your energy bills. Midwinter and peak of summer as well.”
02:58: My feedback around the shape of the land. The front of house was beautiful. It was really well-balanced. It had a huge driveway. And the house sat really nicely towards the center of the block. It was quite a large block of land. I think it was over 2000 square meters. My only concern was the rear of the property. So once you passed into the backyard, the slope of the backyard was so steep, that just living in that kind of space isn’t natural. Something like that is what future buyers will be concerned about. And future buyers will have negative feedback on. And, when it comes to negotiating, it will give them a walking away point. “I like the house, Mr. Real Estate Agent, but, you know that backyard… I don’t know.” And that’s what stops buyers from paying absolute premiums. So this is the kind of feedback that your buyer’s agent can actually give, when it comes to selecting the right kind of property.
03:57: So that really covers the side of using a buyer’s agent that most people don’t think of. Let’s talk about the things that people commonly know about why you use a buyer’s agent. You’d want a buyer’s agent to be a powerful negotiator. And that’s definitely the case. And when it comes to sitting at the negotiating table, buyer’s agents definitely are on par with the agent they’re opposing.
So, they’re able to win the best deal possible, not just on price, but also on terms. We’ve got a podcast on negotiating, so you can have a listen to that if you wanna know a bit more about how a buyer’s agent can help, when it comes to negotiating. Secondly, a buyer’s agent can represent you at auction and do everything involved in regards to getting you ready for an auction, making sure you’re looking at the right property, making sure you have the right budget. And then going there and doing the rest.
All the due diligence involved in working out the price, bidding, negotiating, closing the deal, doing all the contracts. So it really takes the stress off the buyer in a scenario that is high pressure. And it’s designed to be high pressure. So you’re basically gonna be in a scenario where you’re gonna pay a lot more for something, because you’ve lost track of your normal senses and reality of what’s really going on.
05:18: The last point I want to make about using a buyer’s agent is, access to off-market listings. These are properties that are for sale without a public advertising campaign. Now, through just being in the industry, real estate agents approach buyer’s agents saying, “Hey, look I’ve got this property for sale, that property for sale” and vice versa, a buyer’s agent would approach a local real estate agent and say, “Hey look, I’ve got a buyer that has this buying criteria. What do you have that’s coming on the marketplace?” So using a buyer’s agent expands your ability to look at more properties.
05:52: So let’s talk about the cons or the negatives of using a buyer’s agent. One of the biggest problems with a buyer’s agent is they’re not guaranteed to actually save you money. For instance, when the market’s moving up in value and you’re at an auction where there’s multiple bidders, the bottom line is, the bidder with the highest budget will most likely win the auction.
Now, there is auction strategy when it comes to bidding. And buyer’s agents can leverage that. But at the end of the day, you’re only as really good as your client’s budget, when you’re a buyer’s agent. That is a bit of a negative.
06:25: On the flip side, your buyer’s agent can try and stop an auction and try to negotiate prior to an auction and use scenarios and strategies to try and close a deal earlier, so they’re not in a scenario where they have to attend an auction. But when a market is going up in price aggressively, pretty much every property in an area will be going to an auction because it’s just easy to sell that way. So, that is a pretty big negative when it comes to using a buyer’s agent. And it’s important to understand that when you are hiring someone, that there are a lot of benefits but, if the main reason for hiring a buyer’s agent is they will purely save you money, my answer to that is, it depends on the market that you’re in.
07:06: So we’ve come to the end of the podcast and I hope that’s been really informative and you’ve gotten something out of this. But look, if you have any further questions, check out our website at wiserealestateadvice.com.au. Feel free to drop us a note or give us a call, we’re more than happy to help out and answer any further questions you might about buyer’s agents.
07:26: You want to hear more about real estate topics that we have on offer when it comes to this podcast? Check out propertyinvestorpodcast.com.au. Next week’s episode, we’ll be talking about auctions. And how buyer’s agents can help you at an auction and how they can generate the best outcome for you as a buyer. Thank you for listening.