Property buyers often ask: is it worth using a buyers agent? Since there is no parallel universe, it’s impossible to calculate with exact certainty how much our clients would have paid if they had not engaged us. The best answer, we believe, lies in real life examples. Some of these properties our clients DIDN’T go for. Had our clients been inclined & ready to jump for these opportunities we know they would have paid a lot less than another buyer subsequently did. In other cases, our clients did buy the property and would have offered way more than we let them!
I originally wrote this blog back in 2009 and even though the dollar amounts have changed (don’t these sound cheap!!), the principles remain the same. When asking is it worth using a buyers agent, it’s important to consider the amount that can be saved on the purchase price. In many cases this saving comes from our negotiation skills. At other times, savings come from taking the emotion out of the equation, a more nuanced understanding of property values, being strategic about auctions, or benefiting from our agent relationships.
Example 1 – the agent gave us information about the vendor’s circumstances and had we acted on it, we could have got the property for $500K. It subsequently sold a week later for $515K. $15,000 potential saving through our inside knowledge and relationship with the agent.
Example 2 – we were advised by the agent prior to auction that reserve was going to be $510K, and that we possibly could pick it up for $505K. Passed in and sold 3 days later for $521K. Minimum $11,000 potential saving, another example of how a good working relationship with an agent can save you money.
Example 3 – passed in at auction in December for $1.355M. The agent had been quoting @$1.3M and we felt that it would probably achieve that. The under-bidder was at $1.35M, so this had been a competitive auction and the vendors regretted not accepting the highest bid. In the three months after the auction, Xmas had come and gone, the market had destabilized at this price level, and the property was tainted from having been on the market so long. Through protracted negotiations with the agent we held firm and secured the property at $1.255M. A saving of $100,000 resulting from knowing how the time and vendor greed work against each other. Is it worth using a buyers agent? These clients certainly think so!
Example 4 – our client came to us after her offer of $727K on a property that was being quoted as “early $700,000s” was rejected. She did not know whether to believe what the agent was saying and was prepared to pay $780K for the property prior to auction. This property uniquely suited her needs and she was prepared to pay a premium for it. After many discussions with the selling agent and assessing the competitive situation, our advice was to be strategic and wait till auction. Our client was so keen on this house she instructed us to bid up to $827K!! We secured it for $745K, a saving of $82,000 less than what she was prepared to pay.
Example 5– similar circumstances to the property above. Our clients were about to make an pre-auction offer and were considering the figure of $807K. Once they engaged our services, we advised them to wait for the auction. Their instructions were to go to $813K if necessary. We secured it for $780K, a saving of $27,000 over what they would have paid without our advice and $33,000 less than they were prepared to pay.
Example 6 – Our clients had found a property that they were desperate to buy, however, the agent had suddenly procured another buyer and this was putting pressure on them to pay more than they needed to. Our advice on offer strategy was carefully planned and we secured the property for $2,500,000, which was $50,000 less than the premium they had been prepared to pay. Our clients admitted that without our guidance, they would have succumbed to pressure and fear of losing the property and increased their offer, possibly even over the amount that they had felt comfortable paying.
These examples all demonstrate how a buyers agent can save money during the negotiation phase, however, the true saving is often made in what you DON’T buy. When you buy the right property, one that grows in value over time at a rate greater than other property in the same area, then the real benefit is higher capital growth. Is it worth using a buyers agent? Of course, it’s “yes” if you choose a good one. The answer to whether they’re any good or not will sometimes be best understood in the future, when you go to sell.
If you’d like to hear about the Good Deeds® Predictive Indicator for Capital Growth (that’s right, we have a tool that helps us identify capital growth over-performers!), send us an email and we’ll schedule a call.
First published: August 2009
Updated: October 2019
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.