Are lost weekends the worst part of house-hunting? Suffering endless open for inspections, an over-loaded in-box of listings and sales-driven real estate agents?
For some buyers, the experience is clouded with fears: of missing out for a lousy $1000; of paying more than it’s worth or more than the vendor’s bottom price; of buying a property that might prove to be unsuitable and paying for the mistake forever.
For a novice, bidding at auction against tactical adversaries and aggressive auctioneers is a nightmare, as is dealing with the rules of submitting offers for private sales and expressions of interest.
It surprises many that buyers’ agents (or buyers’ advocates) don’t have a bigger presence in Australian real estate, handling all of the above and more to varying degrees, depending on the client’s brief, and being able to source properties off-market, often from selling agents whose vendors want privacy or a quick sale.
And it surprises buyers’ agents that people who wouldn’t consider cutting their own hair or laying their own carpet hand over the biggest sum of money of their lives, with no expertise and sometimes with the selling agent as their only advisor.
‘Not only should a seller have good representation in the transaction, but also buyers,’ said Janet Spencer, vice-chair of the buyers’ agents chapter of the Real Estate Institute of Victoria, and a founding member of the Real Estate Buyers’ Agents of Australia (REBAA).
Janet, who was a selling agent before becoming a buyers’ agent in 1995, said statistics were lacking and buyers’ agent sales were not specified in transactions, but it was an important growth industry, especially in a high-priced and rising market.
The fee, however, can be an obstacle. Adding between one and 2.5 per cent of the purchase price – that’s $25,000 on a million-dollar property – on top of stamp duty, legal fees and bank costs is a big consideration.
‘People can be quite sceptical about it,’ Janet said. ‘But mistakes are costly in real estate. There’s a 13 per cent transaction cost in buying a mistake, then selling it and rebuying, plus the stress and the time factors.
‘I frequently see people emotionally engaged at auctions, caught in the competition, and bidding beyond their limit. That’s what an auction thrives on, people competing for the property.
‘When I started, a two-bedroom flat was $35,000, now it’s around $500,000. If you’re borrowing 80 per cent of that you want to be buying well. That’s what [is] driving consumer interest to get a professional.’
The fees, negotiable by law in Victoria, are paid after purchase – a buyer’s advocate cannot deduct commission on the transaction. An upfront retainer can also be added.
Michael Ramsay, REBAA inaugural president and a buyers’ agent since 1998, said it created ‘an equal playing field’.
‘The main thing is that we’re in their corner,’ he said.
Michael has acted twice for Linda Cantan – a decade ago for a Richmond investment property, and last April for a house in Malvern. Both were bought before auction.
‘I would look at places and they would go for way more than what was quoted initially,’ said Linda, who works in project finance. ‘I started to question, am I looking at the right properties?
‘Michael has a good relationship with the estate agents and gets provided with information I had no access to. He got the Malvern house $100,000 to $150,000 cheaper than what it would have sold for. People can debate about fees but I’ve made that back and more.’
Michael said securing the right property and assessing future prospects was as important as getting a price below the buyer’s expectations. He speaks to neighbours about extension plans, seeks out structural problems and analyses renovation potential as required.
‘Buyers can be highly educated people and very savvy and have a high net worth but be very lost in the property market,’ he said.
James Buyer Advocates principal agent Kristen Hatt said it was a growing industry, and especially strong in Boroondara and Stonnington.
‘The art of buying and selling has changed significantly since pre-internet days,’ Kristen said.
‘Agents keep track of what you’ve looked at, your price points, what you might bid at, and in an auction they might pass it in rather than put it on the market when they know your budget. They are storing and accessing so much more information.’
There is no typical client, but they include time-poor professionals, often with a young family; investors and developers; high-profile clients; and people moving to Melbourne from interstate or overseas.
Janet Spencer said each job had to be tailored to meet a buyer’s needs, which could be constrained by time, budget or specific needs.
Levels of engagement varied from a full property search, negotiation and purchase, to a simple auction-bidding service.
She recommended engaging agents who were licensed estate agents or agent’s representatives, members of the REIV (which ensures they have at least $2 million professional indemnity insurance and on-going professional development) and members of the REBAA, which sets guidelines for professional conduct and has a minimum standard for accreditation.
‘You’d be wise to do due diligence; don’t assume anything,’ Janet said. ‘If someone is offering the service for free they’re not working for the buyer, they’re working for and being paid by the seller.’
Case Study: A family crisis
Margaret Steel had engaged a buyers’ advocate countless times over many years for her property-development company and for corporate investment, but a family crisis showed her the full benefit.
Her elderly mother was in temporary respite care as the family prepared to downsize her out of the big family home. ‘She hated it and we were desperate to get her out but we had very specific requirements because she was in a wheelchair,’ Margaret said.
The four siblings charged Janet Spencer’s Buyer Solutions with finding a suitable unit with disabled-conversion possibilities, in a pocket from Balwyn to Templestowe.
‘Mum put pressure on us and we put pressure on Janet,’ Margaret said. ‘She found the place and signed up within 10 days of the brief. We managed to get it off-market, and it worked out cheaper making a quick decision, as it didn’t go to auction or a heavily contested private sale.
‘It saved us at least three times her fee, getting in ahead of other prospective buyers, and I don’t think we would have even found this,’ she said.