Why are property buyers increasingly using buyers agents?
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.
Australians are using professional buyers agents more than ever before to give them the confidence to make informed purchasing decisions, ensuring they acquire the right property, in the right place, at the right price.
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.
5 reasons why a buyer’s agent can be a useful expert to have on your side
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.
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 buyer’s 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:
‘’On average 10 to 20 per cent of properties acquired by professional buyer’s agents are through either pre-market or off-market channels. Because they speak with real estate agents every day you benefit from insider information and gain the edge as a buyer, accessing properties which are in the process of being prepared for sale or are never listed online’’.
Superior asset selection
There are many factors which 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 buyer’s 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 a balcony and attractive district outlook, this property fulfils our search criteria looking for consistently robust performance over the long term, a quiet street situation and within a 10-minute walking distance to the beach, parks, transport links, and other amenities’’.
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 to 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 buyer’s 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 price and terms resulting in a cost-neutral service. And 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 buyer’s agent makes recommendations on a purchase and they will also highlight ay 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 damp, 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:
|1. Confirm your motivation||
Will this property purchase benefit you over the long term?
|2. Get clarity on your budget||
Run numbers on repayments to ensure you can comfortably manage cashflows, with a contingency/buffer
|3. Secure mortgage pre-approval||
Ensure you get the appropriate terms for your circumstances
|4. Conduct market research||
Helps identify risky suburbs, locations and properties
|5. Location, location, location||
Real estate is fixed in place. You can change many things about a property asset, but never the location
|6. Conduct detailed inspections||
Physical inspections plus building and pest inspections are essential risk management tools
|7. Confirm property will meet needs||
Identify and complete a comprehensive checklist and stick to it
|8. Engage legal assistance||
Confirm ownership history, and any restrictions on use or other issues
|9. Commence negotiation||
Negotiate the best price and terms possible, without undue emotion. Be prepared to pass on the opportunity if the price expectations are unreasonable
|10. Get your documentation in order||
Buying property can be stressful if your paperwork is not available or well organised
Negotiate better price and terms
A professional buyer’s 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 buyer’s 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
“Australians are choosing to use buyer’s agents more than ever before.”
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 buyer’s 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 say’s
‘’When it comes to finding an outstanding agent there really is no substitute for experience, both in terms of years in the industry and local market knowledge and expertise’’
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.
For more information visit the Hedonic Home Value Index Report PowerPoint Presentation (corelogic.com.au)
The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.