This article is supplied by REBAA – the Real Estate Buyers Agency Association of Australia. It gives an outline of fees charged by BAs and why to use one.
When you engage a sales agent to sell your property there is a fairly well established industry fee structure and it’s pretty easy to compare one agent’s offering against the next. But when you look into the way buyers agents charge, it’s not as clear and simple to understand.
Before I go into the different types of services and fee structures, it’s important to note that there is one major difference in the way selling agents and buyers’ agents are paid. Your sales agent is effectively paid on a contingency arrangement – you only pay IF you sell. There will probably be some additional marketing costs that you will be up for regardless of whether you sell or not, but the agent makes nothing (or very little) out of this. Their fee is usually a percentage of the sale price – the more you get, the more you pay.
A buyers’ agent, on the other hand, is paid on a fee for service basis. You will pay for their expertise and advice so it’s not a great idea to engage a buyers’ agent unless you are committed and ready to buy a property.
There are a number of different services that buyers’ agents offer and a variety of ways in which they structure their fees. An agent usually charges either a percentage fee or a fixed fee. Personally, I think it is counter-intuitive to charge a percentage of the sale price. Clients expect their buyers’ agent to save them money, so it doesn’t make sense for the fee to go up along with the purchase price.
Below are some examples of other BA fees. Here at BPS we have gone through a variety of fee options but keep coming back to this one: We charge between 1 – 2% of purchase price with 1-1.5% for over $1M and 1.5-2% for under a $1M. We cap the fee over $2M purchase at a pre-agreed amount. We start on a $1000 (plus gst) engagement fee. We are with you until we find something you want but the longer it takes the fee is at the higher end of the percentage bracket. If we go to negotiation and the buyer pulls out, we invoice at 50% of the expected fee. As you can see below, BPS is below industry average. BPS has a set fee for auctions ($700) and is $125 PH to do specific research.
Other BA Fees
Full property search Different agents charge fees ranging from 1% to 2.5% of the purchase price. Scaled according to price bracket OR determined by individual search parameters.
Examples range from $8000 to $50000+ Some agents put time limits & geographical limits – others will work until you have bought a property. Most require payment of a retainer and some charge progress fees.
Single property evaluation & negotiation Percentage of purchase price (lower rate than the full search percentage). Examples range from $2000 to $10000, dependent on the property type. This service is specific to one property that you have found through your own searching.
Auction bidding Percentage of the purchase price is more uncommon. Most often a fixed fee – some include a success component. Success is largely determined by your budget and the agent cannot advise you on suitability of property nor bidding limit.
Why pay somebody to help you buy a property?
Many people are concerned that they can’t afford to pay a buyers agent, especially if they are already finding it difficult to secure a property within their budget. However, when it comes to buying property it’s important to realise that you could be paying in other ways by not getting expert advice. You could pay in terms of time out of a rising market, where the longer you take to buy something, the more chance you are priced out of your preferred area. You could pay in terms of buying a sub-standard property that has limited capital growth. This is a lot easier to do than most people realise. You could pay by paying too much for a property, either because you don’t have a good handle on values or because you are out-negotiated by the sales person.
It’s crucial to understand that the odds are stacked against a lone buyer dealing with a professional sales agent. They hold all the knowledge and most buyers play a hopeful guessing game. Buying a property without a buyers’ agent is like playing poker, blindfolded, with an agent who is dealing the cards.