Buyer’s Agent vs Free Property Advisor (Ep286)


When you’re looking to invest, should you
use a buyer’s agent or should you use a free property advisor? I’m going to talk about
the differences of both of those and which would probably lead to the best outcome for
your investment. Hi, I’m Ryan from onproperty.com.au, helping
you find positive cash flow property. So a buyer’s agent anda free property advisor.
On the surface, they sound pretty similar. They both help you find and invest in property
and they manage a lot of the process for you. So they look for the properties, they help
you sign for those properties, they help you go all the way through until you finance it
and then you take ownership of those properties and that is where they step back.
But what is better? A buyer’s agent or a free property advisor? And which one should you
use? First, let us talk about what a buyer’s agent
is and then we will talk about what a free property advisor does. So a buyer’s agent
is someone who works on your behalf as your kind-of personal assistant in helping you
buy your property. So you go to them with your investment goals and you say, Look, here’s
what I want to achieve; whether it be financial freedom or million dollars in equity or whatever
it may be, they look at you, they look at your situation, they assess what you can afford
and they then go out into the market and they look for something for you that suits your
needs and suits your goals. They might do deep research into an area to find out if
that is a growth area. They will look at all the properties in the area and then they will
provide you with a short list of properties and they will probably give you advice over
which properties that they will suggest that you go and look at and then you can work with
them in order to decide which property to buy. So a buyer’s agent will help you shortlist
the properties and help you find a property that is going to be good. Then they’ll go
and inspect the property as well. They will then negotiate on your behalf with the real
estate agent. Then they will get you to the point where you sign a contract and they will
even help you through the signing of the contract going unconditional on the property until
you get the keys. So basically, a buyer’s agent helps you from day 1 when you’re thinking
about investing in property, they help you through the buying cycle until you take ownership
of that property and their goal is to help you buy a great investment property. So really,
a good buyer’s agent, when weare talking about investment property, should really know how
to research an area really well. Should know how to find good properties in that area and
preferably have good relationships with the real estate agents in those areas. They should
be able to negotiate on your behalf and they should be able to help you through the buying
process. Now, they are not going to act as a mortgage broker but they can connect you
up with a mortgage broker and things like that. So that’s what a buyer’s agent does.
Now a buyer’s agent is generally paid by you and I’m going to do a full episode on onproperty.com.au/287
so you can find out how much a buyer’s agent charge. But basically they charge around 1%
to 3% of the purchase price of the property. So a $500,000 property, you’re looking at
about $5,000 to $15,000. That is generally paid out of your pocket, it is paid with cash.
It is not paid with money that you get as a loan from the bank so generally it is something
that you are going to have to come up with in order to pay for it. That is why some people
avoid hiring a buyer’s agent and instead they look at these free property advisor services
and they go with those. Let us have a look now what is a free property
advisor and how do they differentiate from a buyer’s agent. Well, they are very similar
in a lot of ways but they are different in one major way. They are very similar in the
fact that they will sit down with you and they will talk through an investment strategy
with you. They will provide you with a shortlist of properties, they will help you sign your
contracts and purchase that property and they will help you take ownership of that property.
But the big difference that separates a free property advisor from a buyer’s agent is that
a free property advisor makes his money from the developers. So they will make their money
from whoever you purchase the property from. They will get a commission from that developer
for selling that property to you basically. So in my mind this creates a conflict of interest
when they are paid by the developers to sell the developers’ properties. So they are then
going to present those properties in the best light in order to get someone like yourself
to buy them so they can make their commission.Whereas the buyer’s agent is paid by you to go out
into the market and to find a property that suits your needs. So that is really the biggest
difference and as well with the free property advisor, you are going to be limited in the
properties that you can buy because they will only offer you properties where they get paid
a commission on which means you are only going to be offered new build properties and they
will spin this and say, Look, we only recommend new build properties because you get great
depreciation blah, blah, blah… but really they only offer new properties because their
business only supports new properties because they need to get paid a commission. So that
really limits the scope of the properties that you can buy and there is that conflict
of interest which in the industry does lead to these properties sold at inflated prices
which means you are likely to buy properties worth less than what you actually paid for.
So property advisor service, it is a lot riskier because of that conflict of interest, there
is no upfront payment but the commissions they make – if you actually try and find out
what the commissions they make, you will find it is very hard for them to give you those
details but if you find out, they are actually getting paid in most cases more commission
than what your buyer’s agent will be getting paid by you.
So that is a big difference between the two, buyer’s agent gets paid by you, works for
you.A property advisor works for free, gets paid by the developer and so there is that
conflict of interest there. So the reason that I think it is better to
go with a buyer’s agent and look, it is clear that I have this opinion and this is just
my opinion. You need to decide what is best for you. But they get paid by you so there
is no conflict of interest. Generally they are going to be successful investors themselves.
A lot of the free property advisors do not necessarily own a property or they might own
1 property, they might own their own house or 1 investment property. A lot of buyer’s
agents that I know that specifically work with investors actually have a large portfolio
themselves. Ben, who is my number 1 recommended buyer’s agent, he is from pumpedonproperty.com
if you want to check him out – and if you want to let him know that you came from OnProperty,
I do get a referral fee for that. He has a large portfolio himself and he is financially
free himself. And there is another buyer’s agent that I know of, she is from mypropertybuyersagent.com.au,
she owns 12 properties herself and then there’s this Lloyd Edge who I have interviewed about
duplex properties himself. So the buyer’s agents that I know that are offering their
services to investors generally have these large portfolios themselves, they build up
the skills that they love property and they want to help other people. So they generally
have the skills that they have, something that they have achieved in property and then
taking those skills and applying it on your portfolio, which I think is great. Whereas
with the free property advisor service, these people don’t seem to own as much,some of them
do own some property but not all of them so obviously check with the individual advisor.
And the same goes for buyer’s agents, not all of them own property. So try and find
one who does. And I have talked about that in episode 285, where we talked about buyer’s
agency service and what you should do when you find a buyer’s agent or if you are going
to work with a buyer’s agent. Another reason what makes a buyer’s agent
good to work with is that they generally know a few areas really well. Again going back
to Ben on Pumpedon Property, he focused specifically on a few suburbs that he has identified as
growth areas and looks for good properties within those suburbs so he knows those suburbs
really well like the back of his hands. So he knows when your listings come up, so that
depth of knowledge can be really powerful for you. They often have access to new properties
before they hit the market. So real estate agents will generally approach buyer’s agents
in some circumstances and say, Look, we are about to lose this property, do you have anyone
that want it? And therefore they can get access to properties before they hit the market or
if they just hit the market, they can find that out really quickly because they are looking
at the market every single day. A buyer’s agent can help you buy new and existing properties
so you have a great pool of options there depending on what your investment strategy
is. And in some cases, especially if you have a great buyer’s agent who knows the area and
can help you buy an undervalued property, you can get in some equity in some cases although
I generallywouldnot count on you being able to get in some equity in the property.
So what makes a free property advisor better? Well, you have no upfront payment. So for
someone who needs the help but doesn’t have the money to pay a buyer’s agent that no-upfront
payment property advisor is very enticing for them because they are getting help, walking
them through the process but they donot have to pay for it. But remember, these people
are getting commissions from the developer and these commissions generally are bigger
than what a buyer’s agent would get and these commissions have to come from somewhere so
even though they are not technically added onto the price of the property, this can lead
to inflation of the price of the property. Meaning you are paying for a property that
is not worth as much as what you are paying for it so be very careful, just because their
services are free, you might pay for it down the track when you have this property that
you cannot sell because you paid more than what it is worth. So be very careful when
going with these free services. They also offer rental guarantees which I
have talked about in the past.It is actually a red flag but a lot of people love these
because they think they are minimizing their risk but these rental guarantees generally
only last 1 to 2 years and they have actually been shown in many cases to be – I wouldn’t
say a scam tactic, but a tactic to inflate the prices because you can say, Look, this
has an 8% rental yield or 7% rental yield with a guaranteed rental return but then after
1 or 2 years they take that rental return away and you are renting it for market value
which can also mean the value of the property drops because you are not getting as much
rental return on the property. So rental guarantees have been used by many property marketers
in order to inflate prices so just because something has a guarantee doesnot mean it
is a guarantee. It doesnot mean it is a good deal. Generally it means there is a red flag
and it is a warning sign and you should be very careful in moving forward if it is a
rental guarantee. My grandad used to say, if it sounds too good to be true, it usually
is so be very careful with that. And you also get a high depreciation if you
buy a new build property from a free property advisor and now generally we all go on about
this, one of the reasons why you should buy a new build property because you get this
depreciation which you can offset against your income tax and you can talk with your
accountant about that but a lot of people use this to turn a negatively geared property
into a positively geared property because they are getting a discount on their income
tax, so they’re getting a tax refund. Look, I’m not going to go into detail on exactly
how it works, it is something you need to talk about with your accountant but that is
one of the benefits of buying a new property is that you are getting a higher depreciation.
You still get depreciation in existing properties but not as much if the property is brand new.
So there you can see the difference between a buyer’s agent and a free property advisor.
Look, I have made it clear which I prefer. 9 times out of 10 I would choose a buyer’s
agent over a free property advisor and other 10% of the time I will probably just do the
research myself. I really just think it is very risky going with a property advisor who
is getting large commissions and has a conflict of interest. There are some good deals out
there but I just hear so many bad stories from people who have gone to free property
advisors and they have just been stung and paid $50,000 more than what the property is
worth and they cannot sell it and they just end up with all these issues. Maybe 1% of
the time I would go with a free property advisor if I think they have a really good deal or
they could get a good discount on land and I actually did my own research to back that
up. I would not rely on what they just gave me. So maybe every now and then I might consider
that but the majority of the time, I would look at a buyer’s agent or doing it myself.
So there you have it, a buyer’s agent versus the free property advisor. Again, this is
just my own opinion. You need to decide what is best for you, what your risk profile is
and who is going to move you towards your financial goal as quickly as possible. If
you want to see a list of the buyer’s agents that I recommend you can go to onproperty.com.au/buyersagents
– both plural there, or you can also get a printable checklist of the 7 Things That You
Should Do Before You Buy Property From ABuyer’s Agent. You can check that out by going to
onproperty.com.au/agent, a-g-e-n-t and you can get that absolutely free. So that is on
onproperty.com.au/agent to get a printable checklist of the 7 things you should do before
buying property through a buyer’s agent because not all buyer’s agents are great. Not all
buyer’s agents are the same and there are things that you should do to protect yourself
and to make sure that the deal that you are purchasing is a good deal and not a bad deal.
So hope this has been helpful to you in assessing whether you should go with a buyer’s agent
or a property advisor or maybe you want to go out and do by it yourself.
I’m Ryan from onproperty.com.au, until next time, stay positive!

1 thought on “Buyer’s Agent vs Free Property Advisor (Ep286)

  • Paid buyers agent vs "free" sellers agent.

    It's all about who the agent is incentivized to generate results for folks. great points Ryan.

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