How much does a buyer’s agent charge?
5 min read
When you’re buying a property, there are many facets to consider. The buyer pays a lot of costs upfront when they purchase including a deposit, stamp duty and legal fees too. There are many other factors that go into making one of the biggest investments you’ll ever make such as location, property type and loan. Which is why many people choose to utilise the services of a buyers agent to help make the right decisions along the way.
One question that often comes up is “how much does a buyer’s agent charge for their services”. There are a few different ways fees may be charged, we’ve listed these below.
Buyers’ agents are licensed real estate agents charged with representing the buyer of a property.
Buyers’ agents are licensed real estate agents charged with representing the buyer of a property. They do not represent the seller in any way.
Most buyer’s agents will have a range of different services available which they can offer to you based on your needs. This could be anything from a bidding only service where they represent you at auction through to a full-service model where they do all aspects of the purchase on your behalf from searching for property, attending inspections, and organising the due diligence.
What fees are charged by buyer’s agents?
There are three main pricing models that buyer’s agents tend to use when determining what fee they will charge. These are:
- Fixed fee
- Tiered fixed fee
There may be additional work charged on an hourly rate if you require assistance above and beyond the standard service offering.
Some buyer’s agents will also charge a non-refundable retainer or deposit upfront when you engage their services.
What is a fixed fee pricing model?
Buyer’s agents who offer a fixed fee pricing model will charge the same fee for their services regardless of the final purchase price. Instead, their fees are based on the type of service they are providing you.
- Bidding only
- Property Sourcing (search, due diligence and negotiation/bidding)
- BYO Property (due diligence and negotiation/bidding)
- Full-service (search, inspection, due diligence, negotiation/bidding)
Depending on the advocate you engage you may be charged a few hundred for a bidding only service through to around $18K for the full-service option. Entourage Property works on a fixed fee pricing model.
What is a tiered fixed fee pricing model?
Like the fixed fee pricing model, a tiered fixed fee works in the same way, however the fee goes up as the property price increases. Buyer’s agents will set a particular price range and charge a different fee based on the price bracket that you purchase within.
|Property price range ($)
|$100,000 – $500,000
|$500,001 – $750,000
|$750,001 – $1,000,000
These prices are only an example and may not be an accurate indication of your actual out of pocket expense. Make sure you understand the fee structure used by the buyer’s agent you engage to assist with your purchase.
What is a commission model?
A commission model is where a buyer’s advocate will charge you a percentage of the property value as their fee. This means the more you spend on the property, the higher the fee you’ll pay your buyer’s agent.
Buyer’s agents will typically charge anywhere from 1% to 3% for their services. Some may also charge a percentage-based fee up to a particular purchase price and then charge a flat fee for anything over that price. For example, it may be 2% up $2,000,000 purchase and then a flat $10K on top for anything over $2,000,000.
If you are only using the buyer’s advocate for a partial service, then you’re more likely to be looking at 1% compared to a full service which may be closer to a 3% fee.
Unfortunately, with this model the buyer’s advocate may face a conflict of interest. Their primary job is to help you buy property and get it for the best price possible. If they are paid a higher fee because you paid more for the property, then they are incentivised to encourage you to spend more.
Another issue with this model is that you won’t know what the final fee you need to pay is until you’ve completed the purchase which could be challenging for budgeting.
Is there an upfront cost to hiring a buyer’s agent?
Some buyer’s agents will charge a retainer or deposit to work for you. This is often non-refundable however they deduct this cost from the total fee payable, with the full fee only payable when you successfully purchase.
Entourage Property charges a 10% upfront deposit with the balance payable on property purchase. The exception to this is bidding/negotiation only fee which is payable regardless of success.
Can I claim buyer’s agents fees as a tax deduction?
It’s best to check with your accountant, but generally buyer’s advocacy fees are tax deductible for investors only. A buyer’s advocate can be very helpful for investors who are looking to buy in an area they are either unfamiliar with or interstate. These fees then form part of the cost base when purchasing an investment property, which reduce the capital gains tax payable when it comes time to sell.
Unfortunately, for owner occupied buyers these fees are not tax deductible.
What can a buyer’s advocate do for me that I can’t do for myself?
A valid question certainly. When it comes to buying property, most people are able to identify good opportunities. Things like location, layout, land size and orientation are easy to research and understand. The question then, is can you buy a great property? You know the kind. The outlier that doubles in value every ten years. The house that sets the suburb record whenever it transacts.
We’ve done a bit of a deep dive into this here, read on.
How do I select the right buyer’s advocate for me?
When you select any professional to assist you, it’s important you are working with someone who is qualified, licenced and experienced with a sound reputation. Of course, as in any industry, there are people who don’t act in good faith or do the right thing by their client.
It’s also important when selecting a buyer’s agent, that they are experienced in the area you want to buy in. There’s no point engaging someone who has no connection or understanding of the area or relationships with local agents. Or if you’re buying a commercial property then a residential only advocate would not be the best choice.
It’s not only about the money
Of course, what a buyer’s advocate charges for their services is important, you don’t want to be caught unawares. A skilled buyer’s advocate will help you navigate the market and understand why a particular property might be listed for such a great price. Low prices can mean hidden costs that you won’t realise are there until after you settle or when you go to sell. A great buyer’s advocate works hard to reduce your exposure to these particular market risks, whilst still securing the property for a good price.
They also have access to more of the market than you do via your online searching. Off-market property is really hot right now in Melbourne, with many vendors opting to sell quietly off the market without listing it online anywhere. These opportunities are difficult to come by if you don’t have a buyer’s advocate working for you, who has a relationship and reputation with the agents who are selling the properties.
Taking the emotional investment out of the picture
Not only are you making a big financial investment when you buy property, there’s also almost always an emotional investment you make too. Whether buying your forever home or making a savvy investment for your family’s future – it’s easy to get caught up in the emotion of the transaction. This can sometimes mean you make decisions that aren’t purely based on logic or budget. The result? It can mean overpaying for a property, overspending your budget or dealing with a good deal of heartache during the negotiation process.
Using a buyer’s advocate helps you to run each of your decision past a qualified professional who doesn’t have the same emotional attachment that you do. They’ll help you quantify your reasoning, conduct extensive due diligence, and advise you throughout the process. This sort of guidance and advice is one of the best investments you can make.
Let’s make it exclusive
When buying, it’s important to ask the question of a buyer’s advocate, “are you receiving any other commission by purchasing this property?”. The answer should be no. Some buyer’s agents may also act as vendor advocates too or be involved in the sale of property in addition to their buyer’s advocacy role. There’s nothing wrong with this if they are not acting for both buyer and seller in a single transaction, as they aren’t able to act in good faith for either party. In fact, the only party benefiting in this situation is the advocate.
Ready to speak with an advocate? Get in touch