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

The OP has asked a question and wants to take the results back to the BA.

That's a definate purpose.

 

Sure, but how does that relate to the discussion in the thread? Doesn't make any difference what he intends to do with the information. That's my point.

 

The BA has already been negotiated down to 1.9% flat fee.

The original post is about taking an alternative fee structure back to the BA.

If the BA isn't open to changing their fee structure any further then my advice to the OP would be to find a BA with a more favourable structure (hence the end game question), or, as per my first post, not use a BA because the OP seems to be right across the process and may get a better result without a BA.

Everyone who has posted is trying to help, sometimes people get so caught up in a set course of action the can't see the forrest through the trees.

 

@kierank
O.K in your points regarding the valuation at settlement but as I pointed out this is a wasted effort as the valuers will in 95% of time value the property at contract price meaning there will never be a "price reduction bonus".
The only way you could ever know is the valuation pre purchase which then my other points come back into play.

 

@kierank
For me using a BA is depending on you and only you, and where you would like to buy. Some investors are very time poor, so they look for BA who have local experience within the area, aware of coming projects for the area. Negotiation skills is very tricky as other said (it depends on the market, growth potential, seller's desperate to sell or not, time on the market,...etc).

It is not rocket science. You can do your own research, heaps of free information on council websites, and state government website, you can pay a fee and get access for RP data or a similar, talk to local REA,...etc.

You can get a loan directly from the bank, and you can get a broker to manage the finance for you, you can get a REA to manage the property for you, and you can manage it yourself. So many things you can do yourself without help from anyone, but it really depends on you / your skills / time and resources availability.

I have used a buyer’s agent for my first property, I did all the research, but I still needed a helping hand, didn't want to risk 300K purchase as a learning experience. I got what I wanted, paid a fee for that (cost of business). And now I do my own research.

Everyone has a job, some do good job, some are expensive. But it is a free market, go to whoever you feel comfortable doing business with. For a buyer’s agent, you need to trust them. Do you own research, but you have to trust them. As some opportunities have to be actioned quickly.

That’s my 2 cents.

Thanks
Ramez

 

I think this model is assuming that the only value in a buyer's agent is the potential reduction in the purchase price, whereas for many, the real value is in having a skilled advocate, being relieved of the searches and inspections, having access to inside information and of course pre-market and off-market properties.

 

These are the reasons why we considered using a BA. The most important factor for us is the individual BA's track record and our faith in their expertise.

It's similar to your 1% selling fee agents. They rely on volume so they may take a lower comission but at same time cost you 5% of your FMV in order to secure the quick sale.

 

I have used BA before, and I have to say, a 2% succession fee is quite reasonable and does not conflict with you having to 'purchase' (where a lower price is better) a property rather than 'sell' (where a high price is better).

Key points:
1) The primary focus of a BA is not to purchase a property at the cheapest possible price. They are there to help you find the right property at the 'right' price.
- There are many variables which a BA cannot influence (eg, multiple bidders, disinterested vendor, heated market or sub-market)

2) A BA is there to provide you with 'advice' .
- Is the location good in respect to your objectives (eg as a PPOR or IP)
- is the property structurally sound
- Can you develop on it
- Provide you with market comparable
- help you negotiate
- Physical presence - if you are out of state.

In my opinion BA has alot more work a sell side agent. They have to do alot of research and analysis in identifying the right property for you. They may have to browse through 10-20 properties to give you 2-3 options.

.

 

If the BA has told you with complete confidence they will save you more than their fee then they should have no problems agreeing to a structure that puts their money where their mouth is.

I think it's unlikely to eventuate and as much as I understand what you are looking to achieve here, I don't think you will find anyone willing to agree to it. Anyone who values their time, has enough experience behind them and values transparent and authentic relationships with their clients is going to be realistic about what is achievable in this market and communicate what's realistic and achievable in an honest manner with their client.

Despite my personal opinion, I would love to see you succeed with this and for them to deliver on their promise. So please do come back and let us know how things progress.

 

I think you have mis-interpreted what @Jacque is saying. The BA hasn't pulled any stunt, they were doing their job in ensuring their client paid appropriate market value (or less) for the property rather than pay near the asking price which was over priced in the first instance.

 

I think that focusing on the discount that a buyer's agent can negotiate is a red herring. If there are several parties sniffing around a property then it'll find its own level.

Besides, 2% of the purchase price in fees is a fair hurdle to overcome in negotiations. Given that sales can stall over $5K, then $20K on a million dollar property is going to be more of a sticking point.

I suspect that the value would lie in:

• Avoiding the emotional side, and overpaying for a property.
• Knowledge of the market, though with sites like Onthehouse even a civilian can get an idea of sales prices.
• Allowing the buyer to outsource the property hunt, and also being able to make suggestions of where else to look.

At the end of the day, if you don't like what the BA is charging then don't contract one.

 

Exactly. And with a $2M purchase, it would be $40K or close to it.

It wasn't that I didn't like what they were charging. I was trying to see whether BAs would align their fees with their value statements (get some skin in the game). In fact, if a BA did this, it was possible/likely that their fees would be higher under the structure I was airing.

It is about value, not costs.

 

A quick update on this thread as to what has happened over the last month or so:

• We have bought a property; settled last Wednesday.
  
  
• We did not use a BA, mainly due to the comments and feedback on this thread.
  
  
• Things happened during this purchase that were to our advantage that would not have occurred if we had used a BA. For example, running into the Body Corporate chairperson and his wife (who we knew), meeting other owners in the building, etc.
  
  
• Things happened with this transaction post-purchase that were to our advantage that would not have occurred if we had used a BA. For example, identifying an ideal tenant even before we signed our contract and having them move in within days of settlement.
  
  
• If we had a BA and our BA was dealing with the REA, we are convinced these events would not have occurred or very unlikely to have occurred. That is not to bag or undermine the value of using a BA. These events were peculiar to this one transaction and are most unlikely to occur on another transaction.
  
  
• We bought a property that meets/exceeds the 41 items on our requirement list. We will never know whether we would have found the same/similar property or even a better property if we had used a BA.
  
  
• We bought a property within our budget, at a price that was lower than the maximum we were prepared to pay and that all indications tell us that we acquired it below fair market value. We will never know whether we would have arrived at the same destination if we had use a BA.
  
  
• By not using a BA, we did save ourselves $38,000 (the fixed fee quoted by our BA).
  
  
• By not using a BA and me not convincing them to go a fee structure of:
  

Engagement Fee + Success Fee + Purchase Price Reduction Bonus​

where the Purchase Price Reduction Bonus is based on the difference between the purchase price and agreed independent valuer’s valuation.​

• For the above transaction, we will never know the Purchase Price Reduction Bonus but, based on a few different scenarios, this Bonus ranges between $7,000 and $37,000.

• Note to oneself: if you believe it is broke, don’t fix it, especially if the fix is going to cost you more money .
  

 

Well there's your problem...

 

As Pauline once said, "Please explain"

 

holy moly. $38k? was it a $2m property?

 

Thereabouts

 

Im not a buyers agent but it seems odd that they insisted on the same fee structure, especially as you had indicated you felt it was too high.

personally i get that the luxury market can be a bit of a specialised one and searches can take a bit longer on occasion so doing it for peanuts wouldn't be an option but realistically there wouldve been no difference in workload finding and negotiating a $1.5m property vs a $2m one, not sure how the extra $10k is justified.

granted the same line of reasoning could be put forward to selling agents...

I can see how a BA specialising in a particular sector or area of the luxury market could be beneficial though, ive been involved in the purchase and sale of a few for close family members/friends and it is a bit of a different game played at times.

1 was a couple of months ago and 1 mid last year and in both cases the people I did it for were successful and savvy business people so no idiots but we felt they'd get a better result with me sorting it out instead of them. can be a bit of a closed circle at times and getting as much info as possible about any aspect of the deal is often invaluable.

glad you got a good result in the end though! in perth atm the $2.5m and up market has some outstanding bargains, there was a house passed in yesterday at $4m that imo cost around that just to build just a few years ago. you're now getting near new riverfront or facing large highly specced homes for less than a smaller similar specced home with no views wouldve got a few years ago.

 

True however there may be other pieces of information you may have learned through a well-connected BA. For instance, your BA may be well connected with tradespeople that have serviced the building and know about maintenance issues that will be costly on an ongoing basis.

Glad you are happy with your result - sounds like it's a good one