A recent news article suggests that it is actually buyers' agents who are responsible for pushing up our housing prices!

A buyer's agent is a licenced real estate agent who works for the buyer, rather than representing the seller.  A buyer's agent gives advice on properties and property types, helps you work out a budget, searches for suitable properties that meet your brief, inspects those properties for you to save you time, helps to evaluate the property - including suggesting a fair price for it - and negotiates the purchase so that the buyer doesn't have to.  The buyer can be as involved as they would like to be - inspecting as many properties as they like - or they can just inspect and consider the handful of properties that the buyer's agent has identified as being totally suitable.

Buyer's agents are becoming increasingly popular, and this is related to our busy lifestyles, the time and cost required to fully investigate and consider properties of interest, perhaps a lack of market knowledge and the demands of work / family. 

Not to mention, the average person takes at least 12 months to find a property, whereas a buyer's agent generally reduces the search time to only 2 months.  Ie, with a buyer's agent, a buyer can buy 10 months sooner, on average.  Considering the way prices move in the Sydney property market, a property will go up far more in 10 months than what it will cost to engage a buyer's agent, making a buyer's agent a very cost-effective option for savvy buyers.

However, in recent times, there has been much discussion about the manner in which buyers' agents structure their fees, and in particular, question over whether the fee structure actually plays a role in pushing prices up.  This is of course a major concern, because first and foremost, a buyer's agent has a fiduciary duty to the buyer to do the very best by the buyer.

Generally speaking, buyer's agents charge a % commission of the purchase price.  This commission is usually 2%, but for lower priced properties, this commission can be as high as 3%.

This means that as a buyer's agent, I get paid more as the purchase price increases.  Ie, I am best served by having you - the buyer - pay more. 

But wait - that's not why you would engage my service!  You would engage my service because you want to buy a property at the best price, not the highest price.

In my business, I have only ever charged a set fee for services.  This fee is generally in line with 1% - 2% commission equivalent, except that it is not a commission-based fee: rather, it is a fee that is established up-front and a fee that does not change with the purchase price.

The other challenge with a commission-based fee structure is that the buyer's agent is only paid if and when a property is purchased.  Herein lies the second issue: if I can get a buyer to buy quickly, I am paid sooner.  This is also not consistent with a buyer's agent's fiduciary duty to the buyer.  The buyer's agent is meant to be advising on the best property for the client's needs and ensuring that the property is a good purchase - and purchased at the right price.

A commission-based structure - where the buyer's agent is not paid unless there is a purchase - and where the higher the purchase price, the more they are paid - does not reflect the duty owed to a buyer by their representative.

The only fair and honest solution is a fixed fee that is paid regardless of the outcome.  Ie, a fee for service.  We pay a fee for service for all other service businesses: we do not pay our solicitor only if we win our case; we do not pay the accountant only if we get a tax return of $x amount; and we do not pay the vet only if our pet is cured.  We pay a fee for a service provided, we do not pay for a result.  Similarly, a buyer's agent service can be viewed as a fee for a service, where the result or outcome is a by product of the service.

A fee-for-service buyer's agent model ensures that meeting the buyer's needs is in line with the buyer's agent's remuneration.  This is the fee model I use here at Melissa Maimann Buyer's Agent.  The fee may be scaled according to the property type, the ease or difficulty of the search, or any other parameters.  This fee is established and known ahead of time, and the retainer ensures that the agent is remunerated even if the buyer chooses not to proceed with a purchase. 

I offer a no-obligation property consult.  Arrange yours today.