You’re probably wondering how a buyer’s agent gets paid if you want to buy a home or property through them. If you hire a buyer’s agent, you pay them. That’s the short answer. But how much do you pay them, and when do you pay them? Are there hidden fees that you should worry about? Here’s everything you must know about paying a buyer’s agent – before you hire one.
How does a buyer’s agent get paid?
Commissions: A buyer’s agent in Australia is mainly paid through commissions earned from property sales. The client (the buyer) pays the commission, which is typically 1% to 3% of the property price. For example, if you hire a buyer’s agent who charges a 1% commission and they find you a $500,000 property. The buyer’s agent fee will be 1% of $500,000, or $5,000, which you will pay out of pocket.
Fixed fees: Some agents charge a flat fee for their services. The cost will vary depending on the services you request. A fixed fee can range between a few thousand dollars and $15,000.
Tiered fees: A tiered fee structure is a flat fee for properties that fall into various brackets. For example:
$4,000 for a property costing $500,000 or less
$6,000 for a property costing between $500,000 to $800,000
$10,000 for any property costing over $800,000.
Can I get a loan to pay my buyer’s agent?
Obtaining a loan to pay a buyer’s agent is almost always impossible. If you manage to get a loan, it will lower the amount of deposit going into your property and your loan-to-value ratio. So, paying your agent with the money you already have in your pocket is best.
If you already have an investment property or own a home and are borrowing against the equity in those properties. Then, you can use a part of that loan to pay your agent to find your next property.
When do I pay the buyers agent?
When you pay your buyer’s agent is determined by the buyers agency you hire. Every agency has its payment schedule and structure. Most agents will require a small fee upfront (also known as an engagement fee), so they can begin the property search. They may need to be reimbursed occasionally, but the bulk of the payment (also known as the success fee) is made after the contract becomes unconditional (successful purchase of the property).
Will a buyer’s agent get a commission from the seller as well?
A buyer’s agent must work for your benefit and find you the best price for a property. If they also work for the seller, they will have a conflict of interest. According to Australian law, a real estate agent cannot act as both a buyer’s and a seller’s agent for the same transaction (accepting a commission from both parties).
Tips for choosing a buyer’s agent?
Choose a buyer’s agent who acts in your best interest and is honest in their dealings. They will ensure they find the best property that fits your requirements for the best and lowest price.
Avoid hiring a buyers agent who works on behalf of a seller, a builder, or a property developer. It will be in their interest to get the highest price for the seller rather than the lowest price for you.
They will also make a big commission from a builder/property developer when they work on their behalf.
Understand what services you are paying for – the more you choose, the more you might pay. So, decide what services you need. Some services you can opt for are:
Complete searches – includes search, assess, and negotiate
Auction biddings only – if you are unavailable on the day a house is auctioned.
Assess and negotiate only – if you have already found a property and would like to buy.
Single property reports – Writing complete and thorough reports for a single property.
Agree on the fee in advance. Ensure the majority of the fee is only paid after the successful purchase of the property.
Buyers agents work on your behalf – ensuring you find your dream property and then negotiating with the seller to get the best price. They make their money by working for you – so they will rely on you to get their commission. The more services you select, the more commission you may have to pay. So choose your services wisely because you will pay your buyer’s agent out of your pocket.