Why Should You Use a Buyers Agent?

Why use a Buyers Agent? What is a Buyers Agent Fee? Is a Buyers Agent Fee worth the money? How do Buyers Agents get paid? Is it really necessary? Find out the answer to all of these questions and more as Bryce Holdaway answers the pressing question in his latest How to Video, Why Should You Use a Buyers Agent?

 

Hi folks, today I want to consider Why you should use a Buyers Agent … and it’s something I have done now for the last twenty years and so I obviously think there is a lot of benefit in using one. I want to demonstrate to you a few things I think you should consider if you’re deciding whether to do it yourself or whether you should use a Buyers Agent.

So, let’s have a look at a few things that a Buyers Agent can help you avoid.

 

1. They can help you avoid buying the wrong asset.

And this is really important because if you buy the wrong asset it’s crucial you realise that down the track it’s going to cost you money. So let’s have a look at an example:

Let’s say we were going to buy a $500,000 property, and we checked the performance. If, let’s say, you could get 5% compounding capital growth and, let’s say, a Buyers Agent could just beat that by 1% — so 6% compounding growth. What difference would that make?

Well, in five years, by buying a property at 6% rather than 5% compounding growth, you’d be in front by $30,972, which is pretty good right? It’s about 2 ½ times what a typical Buyers Agent’s fee would be for that transaction. But it actually gets better. Because for the one-off fee you pay to get a Buyers Agent, over time it starts to look very, very good. After 10 years, you would be in front $80,976 for simply buying a property with a 1% difference in compounding growth over time.

But THIS is where it gets really exciting — because the idea of buying real estate with an investment-savvy mindset is to buy and hold for the long term. So, lets have a look at what this looks like after 25 years…

… You would be better off by $452,758!!

… And this is just from buying a property that does better by just 1%!

So for me, that’s pretty clear. If you buy the wrong property, it’s going to cost you a lot of money over time — which is just one of the reasons why you’d consider using a Buyers Agent.

Now the second reason…

 

2. They can help you avoid procrastination.

Now, why is that important? Well, I can’t tell you the amount of times I have had a conversation with someone who has said, “I’ve been meaning to buy an investment property for the last 6 months, 12 months, 5 years…” — some people have even been waiting their entire life — and the impact is quite significant.

If we have a look at a $500,000 property overtime. If we were to buy this property after 25 years it looks something like that. But if we were to wait just 5 years — and get the same trajectory — that difference there is a whopping $542, 368! It is just enormous.

So if you were to buy the wrong asset and procrastinate… that’s almost $1 million that would be out of your pocket. Just from doing those two things. And all that is, mind you, is starting 5 years later. So the compounding of time is so important because a lot of the time, for most people, the biggest growth doesn’t happen in the early years — it’s when it starts to get exponential towards the end where it makes a significant difference.

Now the third thing I want to talk about is…

 

3. If you DON’T use a Buyers Agent, you may pay too much.

Now here’s a couple of things to think about in terms of what a Buyers Agent does — and, really, there’s a subsection.

The first part is they do research and planning.

What that means, is that if location does 80% of the heavy lifting for an investment asset, the idea is we will find the right location based on our experience and based on the data to make sure we give you the best chance of getting a property that does at least 1% better, or more, in the compounding growth outcome.

So, research and planning really comes down to: what location am I going to buy in, and what’s sort of property are you going to be buying — is it going to be a house, is it going to be a townhouse, is it going to be an apartment, is it going to be a flat, is it going to be a villa… is it going to be any number of all of the different property types that you can have?? And this all comes down to the preplanning before the actual buying.

Now, the second thing is the property search.

So, once we’ve determined what it is we’re going to buy, in which location and what property type, it really comes down to looking on market for all of the properties. But there’s also a scenario where we can look off market. And we see A LOT of properties — quite a lot of them we reject, but the way, because they’re not suitable for clients. But we see so many properties off market where the agent rings us and says, “Hey, look. This property’s for sale. It’s not going to the general market. Do you have a client that might be interested in it?” So we can do that. We can act quickly because it’s pre-planned in advanced. And our client can buy the property without any of the general market ever seeing it. So you can either get “on market” or “off market”

And the third thing we do is the negotiation.

Whether this is private sale or turning up at auction. And in both cases, there is an art and a science to get a property for the best value that we possibly can.

So you can see that there is quite a bit that goes on for a Buyers Agent, in terms of behind the scenes before they get to the bricks and mortar.

Paying too much really comes down to negotiation. But there’s also some real prep work in advance that we need to think about.

 

But the question still remains… “Should I get a Buyers Agent?

Yes, you will pay a Buyers Agent Fee. You will either pay a fixed fee or a percentage of the purchase price — they’re generally the two options for a Buyers Agent fee available.

The question is, if I were to pay that fee can I…

• Avoid buying the wrong asset
• Avoid procrastinating
• Avoid paying too much

… and what impact will that have on me if I DO pay the fee?

 

For me, the conclusion is very, very simple. And, yes, clearly there is a bit of self-interest here given the fact that I am a Buyer Agent. But just this (Bryce points to the first point), just making sure you buy the first asset, even if it’s just with a 1% better compounding growth, and only at the 5 year mark, you make the fee back, and then some. And sometimes when you buy a property, it’s not until 10 years down the track that you realise it was the wrong one, and you can’t actually get that time back — and what we’ve seen from what we’ve just done, if you procrastinate and just lose 5 years, it makes a huge difference!

It’s really, really simple. I think you should strongly consider using a Buyers Agent. Because this (Bryce highlights the Buyers Agent Fee), BUT over here is the value you get.

Price is what you pay. Value is what you get.

In this situation I think it’s pretty clear that the value you get certainly outweighs the cost of engaging a Buyers Agent.