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The way property is bought and sold has changed a lot in Australia over the past few decades.
Not only have we seen listings move from shop windows to online portals, but buyer’s agents have become a growing part of the sector, too.
While they have been a part of the profession in the US for a long time, it is only in recent times that they have staked a claim here.
Compared to selling agents, they are still a small minority of the sector, and like so many things it is taking a while for legislation to catch up with change.
And that’s why it’s imperative that you do your homework before engaging someone to buy property on your behalf – because sometimes they might not be what they seem.
So, here are five questions to ask before hiring a buyer’s agent.
1. Are you licensed?
While real estate legislation differs in each State and Territory, property professionals generally hold a real estate license.
You can check with your local Office of Fair Trading to see if the person you are dealing with is appropriately licensed.
A licensed buyer’s agent works solely for the buyer, which means they do not sell the property as well – in fact, it is illegal to operate on both sides of a transaction in Australia.
Spruikers, on the other hand, generally don’t have any qualifications at all and are in the game to simply market inferior properties to unsuspecting buyers, which is why this question is so important.
2. How are you paid?
Professional buyer’s agents work exclusively for buyers and that means they are paid by them, too.
They are 100 per cent independent and have a legal duty to operate in the best interest of their client, which is the buyer.
On the other hand marketers and some so-called “property mentors” don’t have such an ethical standpoint and because they’re usually not licensed they don’t have to worry about any legal ramifications.
Unfortunately, that sometimes means they might charge a buyer a fee to find them a property, but they’ll also be taking a sales commission kickback for recommending a property to you – which is usually off-the-plan.
If you ask them this question and they refuse to answer, well, something is not quite right is it?
3. Which associations do you belong to?
That leads us to the next question, which is a sign of the professionalism of the person you are dealing with.
Buyer’s agents and property investment advisers generally belong to their relevant industry associations because they are committed to an ethical sector.
They may belong to the Property Investment Professionals of Australia like I do, or the Real Estate Buyers Association of Australia, as well as the local real estate institutes, all of which require their members to abide by strict codes of conduct as well
Spruikers don’t belong to any associations because their time in the sector is short – they make their money from unwary buyers and then they promptly disappear into the night.
4. Are you a property investor?
Buyer’s agents are in the business of property investment because they believe heart and soul in using it as a wealth creation vehicle for their clients as well as themselves.
You must ask your buyer’s agent whether they are an investor themselves, because if they’re not how can you be sure that they know what they’re doing?
Likewise, you should ask them whether they follow the investment strategy that they are recommending to you.
If they don’t, well, you should question whether what they are suggesting is really just an avenue for them to make money – off you.
5. Are you part of a team?
While the buyer’s agency sector is growing and attracting new people all the time, experience is still vitally important.
Your buyer’s agent should be a part of a team that has property investment experience over a number of market cycles and who have a depth of experience and research.
They should not be one-man bands working from a mobile phone and PO Box number.
Being part of a team gives them access to a wider range of industry contacts (which often means more off-market properties), someone to challenge your ideas as well as better opportunities for ongoing training.
A good buyers agent will have a good support team and their company will have a research department
6. How long have they been in the game?
Believe it or not, we’ve had three property slumps over the last decade…
The 2009 downturn was caused by interest rates rising to 9%.
The 2012 slump was again caused by rising interest rates – they peaked at 8%.
Then there is the current credit squeeze induced slump
But many of today’s buyers agents haven’t experienced downturns
Take the recent price surge in Sydney – if your potential agent only has the most recent cycle under their belts, then maybe their success was because a rising tide lifts all ships.
On the other hand, if they can provide evidence of investment success in soft market conditions then they clearly know what they’re doing.
Spruikers will only be able to tell you of recent examples, which may have shown growth because of a market upswing, but they won’t be able to show you anything more sophisticated than that.
The bottom line…
Savvy property investors have access to more professionals than ever before, but the growth of the sector means it has attracted a handful of unscrupulous operators.
While some people still get caught out by promises that are just too good to be true, the smartest investors know who is who in the real estate zoo – and can spot a spruiker from a mile away.