The article was originally published on NAB’s Private Wealth Blog and reproduced with permission.
Why using a buyers agent delivers
In challenging market conditions, Australians are choosing to use buyers agents more than ever before, we’ll take a deep dive to find out more.
The blue-chip, upper quartile of Australia’s housing market has been running hot over the past year, reflective of historically low mortgage rates, resulting in a highly competitive market.
The strong demand from buyers has not always been met by willing vendors, and total listings have been running around 20 per cent below their five-year average.
Due to the low volume of quality stock in the market, many homebuyers and investors have been missing out, with homes in desirable suburbs selling quickly, often at the first open home (or even beforehand in the more sought-after locations).
With interest rates now forecast to rise over the year ahead, more listings are expected to come onto the market, presenting more choice and greater negotiating power for budding buyers.
However, buyers of A-grade stock still need to act decisively, which can be difficult given the size and complexity of the housing market as an asset class.
With up to three per cent of residential purchases now made through buyer’s agents, we identify some of the key reasons why using a market professional to assist with the purchase process has grown in popularity for locally and globally based buyers, both in the investor, owner, and luxury property markets.
Saving precious time, cost and stress
Time is money, as the saying goes, and time-poor professionals in areas such as legal, accountancy, medical as well as managers and executives in large and smaller organisations are increasingly turning to buyer’s agents to help them buy property, to save them time, cost, and stress. This is not surprising when you hear Pete Wargent co-founder of Australia’s first national marketplace for property buyer’s agents, BuyersBuyers advise that it takes over 7 months and 90 hours on average to buy a property with over 50% of people finding it a stressful process.
Once seen as a premium service, buyer’s agents are now also being used by first home buyers seeking expertise and guidance.
While it was once common to buy locally only, today borderless investors and purchasers of holiday homes and investments are increasingly buying regional or coastal properties, upstate and interstate.
Weekends are precious, and buyer’s agents can save countless hours and a good deal of stress through their expertise. They do all the weekday and weekend inspections for you and finalise a recommended shortlist.
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Access to ‘silent sales’ and unique properties
Anyone active in the market over the past 18 months would be familiar with the level of elevated levels of attendance and interest at open homes and auctions. Online bidding is now at the forefront of purchasing and buyer’s agents know how to best position you at this stage.
Leading buyers agent, Pete Wargent says that a highly sought-after property can often be sold before you have a fair chance of buying it. The figures vary by market segment, price range, the stage of the market cycle, and by individual buyer’s agent and he advised:
Superior asset selection
There are many factors that contribute to acquiring the right property, in the right position, and at the right price.
Buying properties with a high land value to asset ratio, in landlocked suburbs where demand is growing, and where the new dwelling supply is constrained, has been a proven strategy over time.
Once a detailed brief has been decided upon, the expertise of a buyer’s agent can find you a property in a location with both desirability and scarcity value, adopting a more scientific and less emotion-driven approach.
A recent example, a 2-bedroom property with parking was secured by expert local buyers agent, Ben Weeding from the BuyersBuyers agent network. He bought an apartment for a professional couple embarking on their first investment property, who started out not knowing where to buy, or the budget they had available. BuyersBuyers explored multiple areas across Australia and saved the clients hours of research and de-risked the final purchase to enable them to buy with confidence in a blue-chip suburb they had never considered.
Purchased in the popular locale of Coogee in Sydney’s eastern suburbs for over $1.3 million dollars, Ben secured it through his extensive contacts with local selling agents.
With height restrictions on development, the locality is experiencing a tightening rental market, and property experts expect to see a strong increase in Coogee rents over the next two years.
The difference in your results over time when you purchase an excellent property could be substantial. Superior asset selection gives stronger price appreciation over time, due to the power of long-term compounding capital growth.
While a buyers agent typically might charge one to two per cent of the purchase price as a success fee, this can often be saved through the negotiation of preferential prices and terms resulting in a cost-neutral service. And the choice of a better asset will also likely recompense a buyer’s agent’s fee over time.
The benefits of due diligence and avoiding critical mistakes
There is a long list of due diligence criteria to be fulfilled before a buyers agent makes recommendations on a purchase and they will also highlight any risks. This, combined with extensive property research and experience, provides more security over asset selection.
Full inspection by a buyer’s agent and compilation of a detailed property report would highlight some of the key benefits as well as some of the main physical risks to avoid such as roof issues, live termite activity or dampness, so the buyer’s agent will typically insist on a full building and pest survey, in addition to their own inspection.
Due to the significant transaction and holding costs involved, property tends to work most effectively as a long-term investment, so it is advisable to perform thorough due diligence to avoid costly mistakes down the track. Here is a useful checklist:
|Action Items||Key Considerations|
|Confirm your motivation for buying||Will this property purchase benefit you over the long term?|
|Get clarity on your budget||Run numbers on repayments to ensure you can comfortably manage cashflows, with a contingency/buffer|
|Secure mortgage pre-approval or required financing||Ensure you get the appropriate terms for your circumstances|
|Conduct market research||Helps identify risky suburbs, locations and properties|
|Location, location, location||Real estate is fixed in place. You can change manythings about a property asset, but never the location|
|Conduct detailed inspections||Physical inspections plus building and pest inspectionsare essential risk management tools|
|Confirm the property will meet your needs||Identify and complete a comprehensive checklist andstick to it|
|Engage legal assistance for title and statutory authority searches||Confirm ownership history, and any restrictions on use orother issues|
|Commence negotiation||Negotiate the best price and terms possible, withoutundue emotion. Be prepared to pass on theopportunity if the price expectations are unreasonable|
|Get your documentation in good order||Buying property can be stressful if your paperwork is notavailable or well organised|
Negotiate better prices and terms
A professional buyers agent is experienced in appraising a property and negotiating the best possible price and terms on their client’s behalf. Having an experienced and independent buyers agent in your corner can also remove the emotion from the purchase.
Their job is to ensure you follow the numbers to make an informed investment decision and also to let you know when to walk away from a bad deal. And if you’re buying a property which goes to auction, having an experienced and unemotional bidder to act on your behalf can be invaluable.
The property purchase process is slightly different across Australia’s states and territories, so having an expert who understands the nuances on your side of the deal makes sense; especially if buying interstate.
What to look for in a good buyer’s agent
Riskwise Property Data CEO Doron Peleg says that property market professionals must be appropriately licensed in the state they are purchasing in and insured through professional indemnity
The skills of a buyers agent from sourcing, negotiating, and acquiring property for the best price and terms can only be formed and honed over years in the industry. Pete Wargent says:
If you’re looking to invest in property but are confused by the array of available market analysis and information, the latest hotspots, and opportunities, then having a licensed and experienced professional buyer’s agent guiding you through the search and purchase process can make very good sense.
Buyer’s agents are an invaluable asset when market conditions are competitive and can ensure that the process runs smoothly for you.
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