Alright, folks! Let’s bring on Episode 167!!
Today is all about Buyers Agents… and when you SHOULDN’T use one!
Yep — it might seem a bit strange considering Bryce is one… but we’re going there! And why? Well, we’ve received a couple of questions recently about the cost of a Buyers Agent, and whether or not this represents value for money…
So, how much (in $$) is a reasonable Buyers Agent fee? — and WHY exactly do they charge what they do?
More importantly, how can you tell if you’re dealing with a Spruiker?
… just a heads up before we jot down the 2 questions we’ll be answering Folks, the 2nd question is particularly long, so if you can’t catch everything Bryce says on the podcast, we’ve got you covered below 🙂
So, the questions that came in are:
“Good afternoon Team. I have organised an interview with a Buyers Agent and they told me what I should do, which has been in line with the fundamentals of The Property Couch. But the bottom line is it’s $15,000 for them to find my first investment house! I wanted to think about the best way forward, and ever since they keep ringing, and picking on my FOMO, which has since turned me off using them. What I want to know is, what risk do Buyers Agents hold and are accountable for? Because as far as I can see, they don’t hold any risk in regard to a return on the investment I am left with. Should people place an act against its members to ensure a warranty or guarantee in place to hold these business accountable?”
“Hi Ben. I have a question on using Buyers Agents. I am genuinely considering using a Buyers Agent; but the cost is much higher than other property professionals. I think that if the price was affordable, very few people would fall prey of the spruikers. Here’s what I mean: solicitors are equally important partners in buying a property and they are appropriately trained and their role is important — it’s actually mandatory to use a solicitor or a conveyancer and yet they don’t take advantage of the fact that you can’t buy property without them. Most charge around $2000 — and one can pay even less with conveyancers — I’ve used conveyancers twice in Victoria and paid $770. They arranged settlement, made sure your bank doesn’t delay to settle, they advise me on the contract, their fee is NO WHERE NEAR that of a Buyers Agent. BA charge around 10K when buying a $450,000 house, this is more than 3% — that’s a very high price to pay for financial advice. The other important person for a property investor is a building and pest inspector — and yet they are nowhere near what a BA charges… $100 will get you a building and pest inspection. Another important person — around $600 will get you tax information from an accountant so one can have a clearer picture on how one’s decision will affect one’s position, one can see whether they can afford the investment, they can also do the tax … and yet they charge nowhere near the BAs. Financial Advisors are equally important. They charge about $700 – $2000 their fees are around 1% of investment, the rate charge for investments in SMSF is also around 1%. This includes financial advice, assistance with selecting, usually investing in shares, which can be more risky than property. This is why I think BAs are overpriced and are very good at instilling fear in property investors when they fall into the hands of Spruikers.
The irony of this that the equity they normally use to buy an IP is usually from their home, which they bought themselves. I think that if a BA charged around $2,000 more people would use them and spruikers would be out of business. I’m also aware that some BA provide financial and strategy advice and, therefore, feel as if they should charge more. I don’t think most of them are qualified financial advisors, but they charge more than financial advisors. To be fair to them, they don’t call themselves as financial advisors but, rather strategists, which is the additional serving to source a property. I don’t think mum and dad need a strategy plan every time they buy a property, and yet they pay for this every time they buy a property through a BA. And the ones I have spoken to say they charge so much because they don’t only do sourcing. Financial Advice can be done once, and one can pay, say, $1000 – $2,000 session for the planning, formulation of the strategy and the sourcing … be not more than $2,000, which is less than a lot of property investment professionals. I think the high cost of BAs and the fear in which they instill in investors make those who can’t afford their exuberant price fall into the advice of spruikers.
I’ve identified a region I want to buy in Adelaide and want someone who can view properties for me and buy for me. I’ve already seen a Financial Planner and strategist and what is remaining is the property. I’ve done my adequate research, I’ve contacted a BA and the average price is $10 – $15K and I fail to find justification in this fee. I know that a provider of this service can charge whatever they want as someone on the other side of the transaction is willing to pay that much.
My question is: I wanted to ask you as a Financial Advisor whether you find Buyers Agents fees reasonable?”