Using buyer's agent as a FHB

I'm considering using a buyer's agent as a first home buyer with a low budget ($400k).

Keen to hear from others in a similar position (FHB/low budget) who have done so.

Are those who use buyer's agent typically with deep(er) pockets and after investment properties?

Cheers.

 

Hey Oasis,
It really depends on a number of things. Firstly and most importantly are you talking about an investment or your PPOR? If PPOR then a BA is irrelevant, obviously you should decide where and what you want to live in.

For an investment then my answer would be maybe but leaning towards no. Being a FHO I am guessing a deposit has been hard to save? If so then using a BA you will be foregoing about 2% of the purchase cost (8k). Not saying a good BA could not recoup these costs with a smart purchase but why not spend some time doing your on research. This combined community is probably more educated than 80% of BA's and guess what, their advice is free.
Do you plan to buy in your own state? If so then start pounding the pavement, you will be Suprised how much you can learn whilst being on the ground and what's better you will learn ALOT more for your future investing than just delegating the task.

Do not be in a rush to buy, you have time and it's likely next year we will see a few market corrections meaning your hard earned deposit will go further. If I were you I'd save the 8k, spend 6 months educating myself, wait for some correction and by then you will have more money, more wisdom and more opportunities to buy well.

Good Luck!

 

Here's a BAs perspective from experience.

As a FHB to pay a BA $10K out of your hard earned / saved deposit money is a hard ask. It was OK when the government was handing out free money in the form of FHB grants of $7+K but they are not doing that now for established property......and new property is mostly overpriced by comparision.

Don't get me wrong, we do have FHB as clients but they tend to be buying $800K - 1.2M properties and is it easier to justify the BA fee in this case.

Likewise with investors - paying a BA is just leveraging their time better. Even more so with interstate purchases. We have had a number of Victorian clients in the past who see a NSW BA as almost being free. Due to the fact that Vic Stamp Duty is so high compared to NSW, Vic investors can get a BA service and pay NSW stamps for much the same cost as just buying themselves (without a BA) in Vic.

All the same, because FHBs are not experienced negotiators and often cannot take everything they need to into account when assessing a property, IMO they can still benefit greatly buy hiring a BA. We recently saved a FHB $30K on what they thought they'd have to pay. So the $10K worked out as a pretty good investment for them.

 

Hi Oasis,I do not think a BA is required or needed for a first home buyer.
Saving for your first home is hard enough so outlaying an extra "cost" would only make buying the right home more expensive.

You know what your budget is and I guess you will also know what areas to look at.

 

I agree with @Propertunity . People new to buying or unfamiliar with buying, the cost of things, processes etc can pay more than necessary for properties and thus the BA fee could be money well spent.

An example is a property I found, that should have been priced $50k higher. However this house had a thick layer of grime in the kitchen, there were cobwebs everywhere, and the whole place was very dark as none of the lights turned on. Perhaps it was the globes, perhaps it needed some rewiring, but we knew that the cost of getting the lights to work, plus the cost of a lot of Spray n Wipe to remove the grime in the kitchen, plus a quick go-around with a cobweb broom... that was certainly not going to come in anywhere near $50k. However, such a property would frighten an inexperienced buyer and they'd run away from that free equity laying in the dirt there for the taking. It's about knowing what things cost, how to get them done, and the processes around purchasing. A good Buyer's Agent can explain to you why this lump of coal is actually a diamond and how that transition will take place.

 

It is a large fee for those on a tight budget. Sometimes I have potential clients who really want to borrow the experience of a professional property buyer but the cost is sometimes prohibitive depending on their income and savings. For those with higher budgets it is not as prohibitive.

I do think that in many cases first home buyers are the most disadvantaged when buying on their own and will benefit from assistance. Whether that be via taking a good quality, affordable course, learning through asking questions of those with experience or hiring a BA - i think it will be a great benefit to you to do one of the above rather than totally DIYing the process.

Most real estate selling agents LOVE a first home buyer becuase they can "squeeze more out of them" (direct quote from many agents over the years when talking shop").

If you take the time to learn the ropes and typical plays by REA's to get you to pay more and gain your confidence in handling these occasions you will be much better positioned.

Time is another factor. Many first time buyers report to spend the good part of 12 months shopping for a property due to being inexperienced in the market. A Buyers Advocate will reduce this time significantly in most cases. Education or some sort of support from someone experienced will also help you reduce your time and effort (if it's important for you to save yourself some time)


Buying property is something you can learn to do for yourself. The resources here on this forum will certainly be a great support here if you post requesting assistance.

As for hiring a BA - there is certainly value in hiring one as a first time home buyer, it will just be a matter of working out whether there is value for you personally.

Some questions to ponder
1) Are you happy to spend the best part of 12 months looking?
2) Would paying $8K significantly impact your buying power
3) Do you feel inspired enough by property (or the prospect of saving yourself $8K) to learn how to do it on your own.
4) are you inclined to procrastinate or feel unsure of yourself when you reach obstacles or situations you do not know how to handle.
5) Do you want to learn how to do it yourself so you can buy more property on your own in the future (some BAs will tecah you as they go, others will not they will just get out there and get the job done - choose one that is right for you if you go down the track of hiring)

You will know yourself better than anyone else.

Best wishes with your new purchase which ever way you go!

Regards, Lisa

 

Summed up here.

It would seem you are not lazy because your here in this forum asking the question and you probably just want to learn from a BA who you figure would get you a good deal on a good house.

How much of your own time would 10K buy? Could you read a book or attend a seminar in that time?

Some people are satisfied just knowing its a good deal on a good house.
Granted though most want to pick the house they live in for themselves.

 

Thanks all.

Yes, I will be buying a PPOR. I have been (loosely) reading magazines (e.g. API) and forums for the last two years and have a good idea of what I'm after.

The most challenging aspects of buying as a FHB for me is probably working out the value of the property, negotiating with the REA/buying at auction. Based on my research, BAs do offer services limited to negotiation which will be more affordable. I might catch up with a few BAs and see how I go.

 

Have a chat with both JacM and Lisa Parker who have posted above, they are good people and have a good name in the Melbourne BA space. There is also Jake Milne who works with Lil Skater at Qura who is also a well reputed BA in melbourne.

 

I used a BA to purchase my first property on a similar budget, I didn't have experience with the area and wanted to purchase there for a few reasons both personal and financial. Anyway, I believe that their ability to negotiate saved around the amount of the fees charged and made the whole process easier.

If you can avoid using one then obviously saving the money is beneficial. However I don't believe that BA's are a waste of money if used at the appropriate time.

 

But you're now homeless!?

 

Are you implying that taking investment advice from someone stating they're homeless is some kind of issue?

 

I used a BA the first time around as I did not have the confidence or knowledge at that point. It fast tracked the process and got me out of my analysis paralysis. My BA saved me money in the negotiation stage and mentored me so I have absolutely no regrets about paying. I interviewed a few before I found a good fit for me and now I have the confidence to purchase again. They say the first purchase is the hardest and I found that to be true, but now I am off and flying. Having a professional to guide me through gave me confidence that I have purchased well.

 

There is a good saying "If you think it's expensive to hire a professional, wait until you hire an amateur" (or in this case do it yourself). BA's do more than just select locations or select properties. The average Australian buys 1 property every 6-7 years. Many BA's are buying 3, 4 or more properties a week! That's an awful lot of negotiating experience. You may well say 'I'm a good negotiator - I don't need a BA' - but what are you good at negotiating? Negotiating property is nothing like negotiating a payrise, it's nothing like negotiating large mining contracts, it's nothing like negotiating large power contracts - they are all completely different, all have there little differences and knowing the in's and out's of the little differences is what makes the big difference. Hiring a BA can certainly save you time and lot's of running around, but it can also save you a lot of money. Whether or not you see value in what a BA does though is another conversation all together. When working out whether a BA is for you or not, ask lots of questions, make sure you know exactly what service they will provide and exactly what they will charge for that service. Then decide if you are comfortable with what they are offering and if you are comfortable with their fees etc. Plenty to think about, but ultimately, you (generally) wouldn't go to court and try and defend yourself and argue against another party who have a professional representing them (solicitor etc) - so why would you try and negotiate by yourself against a professional - who is 100% working for the vendor and trying to achieve the highest possible sale price???

 

I find the value of property and power of negotiation actually boils down to how much you want it.
Do your research, learn the value, make your offer, be prepared to walk away.

If a BA was as beneficial as a lawyer I think there would be more people using them.

 

An agent makes money from the sale, not the sale price.

 

Most selling agents are paid a % of the sale price. The higher the sale price the more commission they make.

 

lets say 2% on a 500,000 sale. they make 10000.

or get the seller another 20000 for 520000 for another few weeks work = 10400

negligible.

 

Often they have different kickers in place for achieving above a certain price....they are then very motivated to get beyond that price as the difference is then a few thousand.