Is a Buyer’s Agent worth it?

I’m a first home buyer and want to get a BA especially for the negotiating process. I’m doing this entirely on my own and need an experienced person to help me.

I want to buy a modest starter property (1-2 bedroom apartment or unit in outer Melbourne suburbs) but I’m discouraged by the steep fixed fees I’ve been quoted. It’s off-putting to think that I’ll be coughing up the same amount as $1m property investors, it feels disproportionate.

But commission BAs have an obvious conflict of interest, it’s hard to trust that they can negotiate the lowest prices when they’re making money off the deal.

Is there an alternative BA fee structure that I can consider? Has anyone used a BA in Melbourne who can steer me in the right direction?

 

The quote for negotiating on its own is reasonable, but it feels like if I’m already paying thousands for that service, I may as well pay more to get access to off market listings which could open up a lot more buying opportunities. The criteria I’m looking for (small units in the outer suburbs) doesn’t have a huge supply right now, finding properties that fit my requirements is like squeezing blood out of a stone.

Have you used a BA, Y-man?

 

As one of those who charge steep fixed fees etc I will try to comment usefully for you.

1 - Congrats on looking to buy your FH. It is big, and scary but good.
2 - If identified that you want experienced help - you have made a good mental adjustment to the risks involved in a transaction of this magnitude.
3 - There are BA's who just do negotiation, and others who only want to do full service work. I have experimented with both and I mostly prefer full service work because I can help narrow the search, suggest alternatives and avoid lemons. It really sucks negotiating on a lemon for someone when they picked it with inexperienced eyes. (Especially if you are successful at in the negotiation). I prefer to listen to my client talk and then I suggest properties some of which they would not have found themselves (they tell me that later) and they seem to be thankful for that part.
4 - With the above point in mind, if you ARE SURE you have found the property you want and CONFIDENT you have eliminated all the location, structural, zoning, strata and other risks, then ring around (try REBAA members first these are the more reputable BA's) you may find someone willing to take you on for negotiate only.
5 - If you are wanting hourly rate expect the rate to be high and for them to have a minimum number of hours.
6 - Most low cost clients still want to pick up the phone and chat after hours, want a bit of info on a weekend, want to know who the good building inspectors are, want advice on renovations and want to contact us for more unknowns later on. I don't like making people pay separately for phone calls, it feels stingy. Giving that time away for free feels demeaning and doesn't feed my family.
7 - If you are seeking the service for a low fixed fee - you will hit resistance at a certain point because the various costs and risks associated with owning a BA firm are significant. We work hard and get experience, the cost in our fees is built into the time it has taken to get to a level of experience.

This is best illustrated by the old Henry Ford Broken Generator Story: (Quoted from Smithsonian Mag) regarding the mechanic he called in as a last resort...Charles Steinmetz.

"Ford, whose electrical engineers couldn’t solve some problems they were having with a gigantic generator, called Steinmetz in to the plant. Upon arriving, Steinmetz rejected all assistance and asked only for a notebook, pencil and cot. According to Scott, Steinmetz listened to the generator and scribbled computations on the notepad for two straight days and nights. On the second night, he asked for a ladder, climbed up the generator and made a chalk mark on its side. Then he told Ford’s skeptical engineers to remove a plate at the mark and replace sixteen windings from the field coil. They did, and the generator performed to perfection.

Henry Ford was thrilled until he got an invoice from General Electric in the amount of $10,000. Ford acknowledged Steinmetz’s success but balked at the figure. He asked for an itemized bill.

Steinmetz, Scott wrote, responded personally to Ford’s request with the following:

Making chalk mark on generator $1.

Knowing where to make mark $9,999.

Ford paid the bill."

8 - If the fee is based on a commission structure you don't like, suggest an alternative. I am always happy to listen if someone wants a performance-based commission as long as it is viable. Basically the good BA's are consultants who are skilled in a specific thing you want, and they want to be well paid for what they do. I personally have never wanted a client to pay more for a property than they should even when my fee has been a percentage. Simply put, business is based on referrals and reputation. I want happy clients or I won't have a business. I have had fixed fee deals where I saved someone $100k on what they would have paid and I got no extra but I was happy for them because they were happy. Would I have liked a bonus scheme in those cases? Sure.

In the end using a BA is all about trust. Clients need to trust I am going to do my best for them and they need to believe my best is worth something. If they don't they won't want to work with me and probably shouldn't take on a BA. Feel free to interview a few until you find one you can trust I guess is all the advice I can give.

All the best with it - sincerely.

 

I know heaaaaps of ppl who would most likely get a better deal if they engaged a BA. You know, the ones will innocently tell the selling agents their maximum budget when asked, among other things.

For me two factors to consider

1. Are you terrible/ uncomfortable/niave with the whole negotiation strategy/process/dance.

2. Is your BA really good and well recommended.

If the answer to 1 is mostly yes and the answer to 2 is yes, you'd most likely be better engaging a good BA to work with you.

 

I used a BA last year in QLD.
ABSOLUTELY glad I did. Saved 10s of thousands and I know I got a fair price and didn’t overpay.
Worth the fees. If you are buying a starter property and buy wrong it will set you back years.
Best of luck

 

If you're planning to be investing in the long run, I think using a BA is a bad decision.
You learn more by doing the legwork yourself.

If you're extremely time poor and value your time at more than what the BA's fee is, then by all means use one.
I personally never would use one, but obviously the decision is yours to make.

 

100% agree.... I see a lot of very BAs everyday.....the real issue is some of the ridiculous charges...some quoting over 10k......

You will never learn about property investing if you don't give it a go......

 

Can confirm, did this for my first, will so it again for my second and third and so on. I learnt a ton of the area and surrounding areas.

I flew to the closest CBD, hired a car, checked the drive (simple straight road) time which was under what Google maps said. All my research was backed by physical facts (shopping mall close, small set of shops closer, cafes and train station a 5 min walk, actually did the walk).

I asked questions to myself, partner, friends, family. If they'd live there, showed pics of the property and surrounds etc etc. All a thumbs up, bought it and haven't looked back.

And now I know more about a suburb I could potentially move to live in my IP if I ever wanted or needed and know I'd be comfortable.

There's so many online resources now, having someone on the ground is a bit moot.

 

That is one of the criteria on our Buyer’s Checklist .

If we had to, would we be happy to live here?

 

Not on mine! Out of 10 IPs there are exactly zero that I would ever consider living in!

 

Not sure of your circumstances, I'm renting at the moment and no PPOR.

At 2 I'd probably stop thinking about it, it's a fall back in case something disastrous happens to me personally where I absolutely have to move into it. Having a place I could be comfortable in was just an option I decided at the time. First IP overthinking jitters hah.

 

I was still renting when I bought my first 5 IPs, but it looks like we just have different strategies, me buying at the bottom end of the market and you likely not doing so. Nothing inherently wrong with either.

 

You bloody slumlord .

 

Exactly, there are many ways of skinning this "property investment cat".

The last IP we purchased (on the GC in 2016) was the most expensive property we have purchased EVER.

More expensive than any of the PPORs we have owned over the last 40 years .

Our strategy was to buy it, get all the NG benefits and then one day make it our home.

Due to a whole stack of reasons, we are moving into it sooner than originally anticipated. So it will probably be our new home by the end of this year.

So this IP is one where we will be very happy to live in it .

 

Most quoting over $10k, from what I've seen.
I know there are overheads and things, but it sounds like a great hourly rate. If you know the area well, I don't know if you could spend longer than a working week sourcing and negotiating for a property (over the space of a couple of months obviously).

 

We used a BA - many thanks @BuyersAgent
It was the right choice for us because we were interstate and we were not familiar with the different areas - which pockets to avoid, which pockets were fine.. and it was good to be able to have someone we trusted on the ground with knowledge and experience and providing us with unbiased information, pictures/videos of properties in question and also understanding what we were looking for in the purchase

best of luck!

 

@jinx77 I've used BAs for purchasing IP and PPOR and in my experience there are both positives and negatives.

Positive with PPOR : BA probably had a better idea if the houses were overpriced etc.
They were bang on at the auction.

Negatives with PPOR : ''off-market'' properties don't exist in a hot market and in a cold market you'll have selling agents approach you anyway if you give them your details.
The BA got played by a selling agent, which left us hanging when we made an offer and the selling agent was fishing for more money with other buyers.
The BA didn't warn us (or didn't know themselves) about easements on the property when they were presented to us. We got pretty far into the deal before finding out, which wasn't ideal.
BA had beef with a certain selling agent, which affected out chances with a property even though out offer was good.

Overall, I would consider using a BA for a PPOR in a hot market but I would research the prospective BAs a bit more before choosing one. Also in general when going through a BA, I would recommend that you take your time and feel free to reject properties. Don't get impatient.