Buyers agents fees explained please.

Discussion in 'Property Management' started by Booky, 9th Sep, 2018.

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  1. Booky

    Booky Member

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    Hi all I'm new to this, just wondering how fees or rates for buyer's agents work. Also is it harder (more expensive) to find positively geared IP's? Cheers.
     
  2. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    Hi @Booky

    Each Buyers Agent will have a different setup. Some will do flat-rate, most will do a percentage of purchase price fee structure. Service inclusions will differ so it is important to understand what is included.

    The cashflow position of a property depends upon a number of factors, including the sale price versus the rental yield, the interest rate you're being charged on your loan, and how much of the purchase price you borrow. If you fund the deposit with borrowed money (eg via equity release), the cashflow position will not be as good as if you'd funded with cold had cash to the tune of say a 20% deposit.

    One particular property will therefore have a different cashflow for two different buyers if they each have a different interest rate and different manner of paying the deposit and stamp duty.

    Hope this helps :)
     
    Last edited: 9th Sep, 2018
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  3. Simon L

    Simon L Well-Known Member

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    Personally I find the percentage fee a massive conflict of interest to the buyer. The buyers goal is to obtain the best price, and if the buyers agent is paid as a percentage of the purchase price, technically its in their best interest to achieve the highest price

    Some BA's have a more complex fee structure but in my opinion, a flat rate works out to the the fairest and simplest way. Whether you're buying a $300k house vs $1mil, the amount of time, effort and work involved is relatively the same so not sure why a fee should be higher just because the purchase price is (coming from buying a standard residential property).

    Of course, the exception is if your BA specialises in development sites for example that have a goal of making you money, then it could be argued that a percentage of profits could form as part of the fee structure - if they are making the buyer a massive profit.

    Different BA's specialise in different types of markets and properties. There are those who specialise in a house for the buyer to live in, or those who specialise in positive cashflow, investment type properties. It does not cost more in BA fees to find cashflow deals (in fact BA's usually charge a lot more to buy PPOR properties)
     
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  4. mik

    mik Well-Known Member

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    And what are typical buyers agent fees for two examples:
    (1) an residential investment property worth $500k and
    (2) a residential property worth $1M ?
     
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  5. Propertunity

    Propertunity Well-Known Member

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    Either 2.2% = $11K ($10K + GST) or somewhere from $11-15K as a flat fee

    same kind of 2.2% or some BA's charge 1.1% when over $1.0M or a flat fee as above.

    But individual BA's will have variations on this.
     
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  6. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    Same mindset as me. :)
     
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  7. Lisa Parker

    Lisa Parker Well-Known Member

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    As you know, I'm a buyer's agent myself if 15 years, and I can 100% say with integrity and conviction, that buying a $300-$500k property is a lot easier and faster than purchasing higher priced properties.

    So much so, that the luxury buyer agents charge 2.75% -3% when you'd think the % would actually come down the higher up you go.

    Give me 5 clients in the $500k price bracket and I will complete the search for all 5 in less time than ONE $1m plus client.

    Firstly, lower priced areas are usually geographically larger, there's more stock on market and more opportunities to look at.

    The higher up you go, the less supply and the supply:demand ratio is not in a buyer's favour.

    Secondly, the disparity between property prices in lower end suburbs are smaller percentage. Making comparable sales research faster and simpler.

    Inner city stock tends to have many more variables, and one variable can add or detract $50k-$150k.

    So comparable sales research and understanding what creates a price variance (when there are so many) is a lot more time consuming.

    Not to mention that the higher up you go, the more advocates are on the scene. So you have genuine competition who have all arrived at roughly the same price as you, come auction day, you end up with 3 advocates all within a few $1,000's differenc in price.

    Cheaper areas are much easier to navigate, with the exception of a super hot market.
     
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