Hiring agents when purchasing a property is important because they can make the process easier and reduce unnecessary stress.
As the deal progresses, you can turn to your agent for urgent concerns about the property. Hence, it is important to acquire an adequate knowledge of how agents operate – including how and what they charge – so you can choose an agent who can give you the right level of service.
There is no industry standard for agent fees, according to the Real Estate Institute of New South Wales (REINSW).
“As a rule of thumb, most buyers’ agents charge a percentage on the purchase price, usually on a fee schedule of fixed price brackets. However, there are plenty of buyers’ agents who will charge a flat fixed fee," says Jacque Parker, director at House Search Australia and deputy chair of REINSW’s Buyers’ Agents Chapter Committee.
What agents charge is based on several factors, including the size of the search area, the scope and degree of difficulty of the property search, the property type, and whether or not a full or partial service is included.
Agents usually charge their fees in two parts. The first is an upfront non-refundable engagement fee, which is between 20-25% of the overall fee. The balance is paid upon unconditional exchange or settlement of the property.
Parker also said that there might be additional charges for out-of-pocket expenses during the property search, but these need to be agreed upon from the start. The client must also issue written permission prior to the search.
Services, meanwhile, depend on what is asked of the agents. A common service is a full search, in which a written contract with the client should be in place. “This agreement stipulates that you will assist them in searching, sourcing, assessing, negotiating and securing a suitable property for a specified exclusive contract period (usually 90-120 days),” Parker says.
In addition, fees should also be reviewed and adjusted according to consumer demand, supply and service inclusions.
The condition of the market also impacts the agents’ fees. During better market conditions, their pricing may go down because of the assumption that their job will be easier than when the market is showing signs of slowing. Conversely, fees may be raised in a seller’s market when there is decreased inventory.
However, Nick Viner, principal of Buyer’s Domain and REINSW Buyers’ Agent Chapter Committee member, warns that while market forces can impact pricing and consumer perceptions of value, maintaining the integrity of a fee schedule is critical for an agent.
“In a weak market, [agents] may find other buyers’ agents are desperate to retain clients and so they slash their fees. I generally do not lower my fees and often tell prospective clients tempted by an offer of lower fees from another buyer’s agent that you get what you pay for. I’m often amazed by how little other buyers’ agents charge. I think they are doing themselves and our industry a disservice given the enormous amount of work involved in satisfying our clients’ requirements,” he said.
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