Buyer's Agent - Surprised At Their Fee Structure!!!

Sorry, but are you serious? IMHO, the current system is seriously flawed as it doesn't reward the right behaviour.

My concern is what if I, without a BA and with my poor negotiation skills, could have got the property for $900k (10% reduction). Not only have I saved myself $50k for the property (compared to the BA price), I also saved myself $19k in BA fees.

There is no incentive for the BA to get me the very best price even though they say they will.

 

Refer to my post earlier. There are plenty of incentives.

 

True but we did have a very open and frank discussion. They are also aware that I am passionate about incentive system that reward the right behaviour. I feel they would be open to hearing about something that would give them a competitive edge.

No. Engagement Fee is paid upfront. Success Fee is paid on property settlement. Bonus is paid on settlement and calculated on the price reduction.

Yep, we have a 41-item requirements list that includes no of beds, no of baths, no of car spaces, distance to schools, train stations, airport, shopping strip, shopping centre, budget range, quiet street, etc, etc.

We shared our list with our BA and they have never seen such an exhaustive list. The BA lives in and specialises in our target area.

It is only after this list has been met that we get into price negotiation.

 

REBAA is an Association and it does not prescribe what fees a member Buyers Agent should charge nor how fees should be calculated. That is up to the individual BA and their client to come to agreement on.

 

From your posts I think you'll be across the process enough not to worry about using a BA. It sounds like you may even get a better result than the BA!

If it's more a time-poor situation we'd be looking for a BA who instilled enough confidence in us (which would include verifiable previous buys) that a few extra $K in the fee structure wouldn't be the primary concern.

We considered using a well known BA once but it was $10k up front (regardless of purchase price) and the only info they would provide is we purchased townhouse X for $230k and it achieves $350 per week rent, and then they wouldn't disclose the body corp fees or address....

 

Agree wholeheartedly. If I was a BA under that fee structure I'd exclusively target properties with listed prices where sellers were obviously "dreaming". Jousting sticks anyone?

 

Then do not use a BA?? I'm confused by this thread TBH. If you can do everything better than a BA then why are you engaging one?

I'm all up for new ideas but IMO what you have proposed is far more open to dodgey tactics but that aside its in a professionals best interest to do there best job as it results in more business. It's like suggesting a broker in here would throw you into the worst loan and fix you for 5 because it pays them the best commission. Ok they make a good commission from you by they have killed there reputation costing them farrr more.

 

When the market is hot a buyers agent may not be able to get you a home at the cheapest price but they may be able to get you the home you want at the market price.

 

Sorry for confusing you.

I think you need to re-read my OP and all my subsequent posts. Please point out to me where I said I could do 'everything better than a BA'!!!! I haven't.

I am considering using a BA because I believe they have a better understanding of the my target market as it is not my local area, they would have a better relationship with the REAs in my target area, etc, etc. I am happy to pay them for this but I was surprised that their fee is a %age of the purchase price.

They (including REBAA) state that they will get you 'the best property for the best price' (the buyer's objective) but BA's fee structure does not support this or reward them for it. I was suggesting a Bonus for the BA if they did. It is that simple.

Can you please list all these 'dodgey tactics' as I would like to know them? If you don't list them, then I

You got to be kidding!!!! I really did confuse you!!! Re-read my OP and subsequent posts. I am talking about the BA and buyer's objectives being aligned (that is, the best property at the best price) and rewarding both for it. The buyer gets a lower purchase price and the BA gets more in fees.

What you have suggested above re: Mortgage Broker is the complete opposite. You stated it as the 'worst loan for the best commission' That is like paying the BA these highest fees for finding you the worst property.

That is not what this thread is about!!!!

 

That could be a definition of "best price"?

 

If you were a BA and pulled that 'stunt' with me, you might get the Engagement Fee but, when you presented your shortlist, I would do my DD and note the 'dreaming' list prices and probably not sign a contract with you (even if the properties met our requirements) as the total cost of buying (including the BA's Bonus as I suggested) would make all of these deals a NO GO. You would keep the Engagement Fee (a small component) but lose out on the Success Fee and the Bonus plus lose a repeat customer.

Yep, that is a great business model. Just jousting!!!

I don't believe any BA takes their clients for idiots.

 

O.K clearly from your use of exclamation marks, I have offended you and your million dollar idea to re-invent the BA structure (Note - I have never and have never planned on using a BA but think there current structure is fine).

If you think it will work then by all means go for it......

 

Many BA's will work on a fixed price fee negotiated with the client prior to search.

 

Agreed. A lot of BAs use pricing loosely based on a percentage of the property value, but prior to searching a specific dollar amount is agreed on in writing. This way it doesn't matter what the final price of the property is, you know what you're paying up front.

 

Nope, I used exclamation marks to make it easier for you to understand my post because my previous posts confused you and you continually mis-understood my message. Even with exclamation marks, you have mis-interpreted my message.

How can you offend me when I do not know you? Even if you knew me, it would be most unlikely for you to offend me. I am not that precious. On the same token, I trust I haven't offended you. If I have, my sincere apologies.

BTW, if I thought my suggested BA fee structure was a 'million dollar idea', do you honestly think I would post it on PC? I might not be the smartest person on the Forum, but, come on, I am not that stupid!!!!!! Note the exclamation marks.

This is exactly my intention with my OP; it certainly was not 'to re-invent the BA structure'. I wanted to test my suggested structure on all the great minds on PC, modify the fee structure based on their constructive feedback and, then and only then, would I present it as an alternative to the BA I am considering using as it has been road-tested (so to speak). If you re-read my OP (last sentence), it says that.

This is why your ' dodgy tactics' comment is of such great interest to me. I will await patiently for that list.

 

This response illustrates they didn't understand your point or what you are trying to achieve which I think is a very important aspect of negotiating. (Understanding what is important to the other person, while also achieving your own objectives).

There are many benefits to using a BA - it depends on your unique challenges (or reasons for wanting to outsource it) as to which of the benefits are valuable to you. Not many of the benefits are listed there, just a few top level ones.

The fee structure can be a bit challenging as it does go against the objective in its prescribed format. There are many ways around that and it should be reasonably easy to negotiate a structure that works for both parties. If you think using a BA is right for you and there is value in it, I would encourage you to shop around and find someone who understands what you are asking for and can structure the fee in away that removes the contradiction.

In regards to bonus fees for discounts etc - be aware (and I am sure you know this already)
1) Sometimes a property is already advertised at a bargain price. a good BA will identify that and get it off the market before someone else does, usually AT the asking price. Not getting a discount off the ask price in this instance doesn't mean you haven't gained anything - but losing access to getting the property may cost you $$ due to missing out and then paying $20K more for something similar in the same market. So you will have still benefited.

I have made the mistake early on of negotiating for clients who wanted an even better deal and ultimately lost the property, when if we had of offered asking, the client would have got the property and still would have been in front. I did it because I wanted them to get the best deal possible, but it doesn't always work out the best for the client doing it that way. Experience teaches us when to haggle and when not to. You can lose good deals just chasing perceived savings in certain markets.

2) I have saved clients genuine money due to negotiating well and using the circumstances at hand to get a property for a lower price than I should have been able to. This is different to perceived savings whereby the asking price was over the top in the first instance. I could easily say for example that I saved one client $300K, but that is not technically true. I just made sure they paid the right price for the property. I didn't push it too hard to ensure it stayed with us and didn't go to other buyers. If it did I believe they would have had to pay $30K - $50K more than they did with competition. The property is now $300K up due to the market turning right after the purchase. Bad timing for the vendors at the time on this one.

3) As pointed out by others- in a hot market don't expect huge savings. Its not a reason in and of itself to hire a BA. There is much more value in hiring a BA then simply looking at perceived discount prices.

The exception would be the BA's who buy in areas that are in the downward cycle of the property clock. Its a strategy, and if its your strategy then I would expect to be seeing discounts.
If you are looking for a 10/10 property with a smaller budget than required (lets be honest, most of us want that!), then you are not going to achieve discounts in many cases in a hot market.

 

Spot on Pete!

 

I fully understand this. The BA I had the meeting with initially quoted 2% of the purchase price. When I asked them to go away and come back with their best number, they came back with a fixed price equal to 1.9% of my budget. I can't see any (financial) incentive for them to get me the best price.

At the meeting, they told me 'they would get me the best property (this was after we tabled and discussed our 41-item requirements list) at the best price'. They tabled numerous example of how much they had saved previous clients. Many times I was told 'we will save you a lot more than we will cost you'. My structure is about building those words into their fee structure.

If BAs firmly believe in their marketing speak, I can't see why it would be such an issue. If their marketing speak is a load of BS, then just say it and we can all move on.

Prior to starting this thread, I was a firm believer in the penultimate sentence (I.e. BAs firmly believe in their marketing speak). Based on my meeting with my BA and this thread, I am starting to think their marketing speak might be a load of BS. No offence intended to any BA.

 

Yeah you seem a bit too hung up about this issue imo. At the end of the day, you are hiring a professional to be your agent in a legal sense - and that comes with a raft of fiduciary duties that they owe you.

If you want to be thinking in that way, all sorts of arguments can be made - "Oh no my surgeon has a vested interest in doing a bad job on my operation so they get more work", or "my lawyer has a vested interest in dragging out my litigation".

There's going to be some level of trust involved.

Speaking as a professional who owes fiduciary duties - it would be unthinkable to throw my client's best interests out the window for the sake of a few extra bucks.

 

Just from personal experience and not answering your question, because in the main I quite understand the numbers.

However, I would not use a BA in a rising market, because they have many clients who will want what you want and tine is money when the market is hot. I was competing with my BA to secure a development site in a hot market...would you believe, I won out. Its a crazy world we live in.

MTR


Food for thought.