BUYERS BEWARE OF BUYERS’ AGENTS
by Neil Jenman
Article written and provided by Neil Jenman from Jenman.com.au . To see the original source of this article please click here. https://jenman.com.au/buyers-beware-of-buyers-agents/. Neil Jenman is Australia’s trusted consumer crusader. He can support you, all the way, from choosing an agent who will get you the highest price guaranteed to when your removalist comes! You get an unprecedented level of total support. All for free. To find out more visit jenman.com.au
Reading time: Apx 5 minutes
Home buyers have never been treated as badly as they are treated these days. Just trying to get an agent to return their calls or emails is a challenge that frustrates thousands of buyers. Never mind finding an agent who is truthful about a property.
In desperation, many buyers are turning to buyers’ agents for help.
Buyers’ agents promise to do for buyers what sellers’ agents supposedly do for sellers, only from the other side.
Buyers are promised access to properties not readily available.
Buyers are told that a buyers’ agent can help them find their dream home.
Buyers are promised that a buyers’ agent will negotiate a lower price.
Buyers are promised that the buyers’ agent will do much of the leg-work involved in finding the right property.
And finally, buyers are promised that a buyers’ agent will reduce the stress on buyers.
But are their promises true?
Yes and no.
Some of today’s Buyers’ Agents are as bad, or worse, than the worst sellers’ agents. Indeed, many buyers’ agents were once sellers’ agents. According to their sales pitch, this means they know the tricks of the trade and can therefore help you swim through shark-infested waters.
In most cases, once a trickster always a trickster.
Here are two quick examples.
First, for INVESTMENT.
Gordon wanted to secure his family’s future through property investing.
He was attracted by the promises of a well-known buyers’ agent who sprouted claims of his experience and integrity.
This buyers’ agent even made a promise to investors that went like this: “The right property at the right price in the right place, every time, guaranteed.”
Gordon bought two investment properties on the advice of this buyers’ agent.
Within two years of buying these properties, the returns were lower than promised and the holding costs were more than promised.
Gordon could not afford to hang on. He was forced to sell-out.
Gordon sold the first investment property for $92,000 less than he paid for it.
Gordon sold the second investment property for $225,000 less than he paid for it.
With expenses, Gordon lost close to $350,000 due to the advice of this self-proclaimed expert buyers’ agent.
This buyers’ agent is still promoting himself as one of the heroes of the real estate world – and is also in cahoots with others who promote him as trustworthy. Beware.
Second, BUYING A FAMILY HOME.
Mary lived in her home for 40 years. She loved it but, like her and her husband, it was getting older, and they thought they might prefer an apartment.
Mary was caught in the whirlwind of pressure that affects so many retirees in the real estate world. The real estate vultures see these naïve folks as easy prey.
Never mind that Mary’s much-loved home was massively under-sold at the public auction, it was what happened next that did the most damage to her – financially and emotionally.
Mary hired a buyers’ agent.
He was soon urging her to buy an over-sized apartment that he said he had been “lucky enough to find” (yea right, it was widely advertised on-line).
At two million dollars, Mary was told it was a “bargain”.
She was also told that prices were going up (true) and if she didn’t hurry up, she’d miss out.
Without having time to think, Mary signed-up with near-trembling hands.
If anyone accuses Mary of being stupid, shame on them. The pressure applied to some elderly folk is tantamount to abuse – bullying, deception, manipulation and, worst of all, blatant lies. It’s all there.
Mary was told, “If you don’t like it, you can always sell it.”
A few weeks later, when she moved in, Mary burst into tears. She hated this apartment.
She was a nervous wreck for months. She cried every day. She couldn’t stand living there anymore, so she finally did what the buyers’ agent had told her she could always do. Sell.
After months on the market, Mary finally accepted a price of $1.7 million.
Three hundred thousand dollars below the price she paid – and yes, prices had increased in that three-year-period. Who knows how much it was worth when the buyers’ agent told her it was a “bargain”?
And, for doing this “service” for her, how much did she pay this buyers’ agent? Two per cent of the purchase price – $40,000.
Mary is now looking for another home. She is not using a buyers’ agent. She is using our help at Jenman Support. As we do not charge consumers, we are not charging Mary.
Mary has realised what many buyers are realising. In many cases, buyers don’t need a buyers’ agent, they just need to know what to do.
And that information should not cost thousands.
Here’s a disclosure: On the two occasions that my wife and I have bought a family home, we employed a buyers’ agent. We were delighted with the help they gave us and the price they negotiated. We used two different buyers’ agents in two states.
And yes, we regarded both as near heroes.
Not only did they save us a lot of stress and leg-work they also found homes we loved.
They helped us pay less than we were willing to pay. The first property was up for auction. We bought it for two hundred thousand dollars below the amount we were prepared to pay. On the other property, we were willing to pay the full asking price, but the buyers’ agent negotiated a discount of fifty thousand dollars.
So yes, our experience was excellent. And if you do what we did, your experience can also be excellent if you choose to use a buyers’ agent to help you buy a property.
Here are some brief tips for buyers.
SAFETY RULES WHEN USING BUYERS’ AGENTS
Rule 1. NEVER INVEST WITH THEM UNLESS..
Too many buyers’ agents are “in bed” with developers. As seen above, they get commission from sellers and buyers. And please don’t say that’s illegal; agents break the law daily with impunity.
Here’s a MUST ASK question for any agent who suggests you buy an investment property:
Can you give me the details of the properties you have sold in the past where the buyers who bought those properties have seen large capital appreciation?
Any mainstream suburban real estate agent will be able to give you details of dozens, if not hundreds of properties they’ve sold that have soared in value.
Most buyers’ agents will not be able to answer this question. They will make excuses. Ignore those excuses.
Try another question:
Have any investors ever bought on your advice and then later sold and lost money?
Beware. Do not buy investment properties through buyers’ agents who fail these questions.
RULE 2 – YOU SET THE RULES
Buyers’ agents should primarily be used to help people buy family homes.
One of the most amazing aspects of the real estate world is how easily sellers and buyers are intimidated by agents.
All the agents seem to need to say is: “This is the way it’s done.” Or “This is our policy,” and the sellers or buyers fall into line like school children at assembly.
Oh please. You are the boss.
You are paying the money. Therefore, you set the “policy”. You tell the buyers’ agents how you will reward them. If they don’t like it, find another buyers’ agent.
If you are determined to take charge, here are some rules to follow:
Buyers’ agents promise to help you buy for less. But most want to charge you a percentage of the price of the home you buy. That makes no sense because the more you pay for a home, the more the buyers’ agent gets paid.
It needs to be the other way around: The less you pay, the more the buyers’ agent is paid.
When you find a property you like, just tell the buyers’ agent the most you will pay. And then give the agent a percentage of how much they save you.
In our case, we offered the buyers’ agents ten per cent of the amount saved.
We saw a property for auction. We told the agent that we were prepared to pay $902,000 (always go a little above a round figure as most people stop on such figures). When the property sold for $700,000, we paid the agent $20,200. We saved a whopping $181,800.
Had the agent charged us 2 per cent, the agent would have received $14,000. The agent was $6,200 better off.
As economic studies have shown – and as human nature dictates – agents negotiate harder for themselves. Therefore, when selling, you should always talk “clear” with agents. Tell them you will accept the offer provided it is after their commission. Watch how much harder they work for themselves.
Some buyers offer agents 20 per cent. If you are willing to pay, say, $2 million and the agent negotiates the price at $1.7 million, you save $300,000.
Would you pay $60,000 in such a case? Most people would.
Some buyers offer agents a bonus if the property is truly a “rare find” – in other words, if it has not been advertised online and is truly an off-market sale (as they are called).
Sure, you may pay more for such properties – and sellers are starting to realise that selling off-market is generally more lucrative – but you get to buy a property without hordes of lookers traipsing through.
As for the agent’s time, in addition to the ten per cent, we offered an hourly rate. In our case, we paid $100 an hour upon receipt of a detailed statement. In the first sale – which was bought $200,000 below our maximum – the agent waived his hourly fee because his commission was so high.
RULE 3 – DO YOU REALLY NEED A BUYERS’ AGENT?
Frank and Jenny contacted Jenman Support for advice about hiring a buyers’ agent. After a few minutes, they realised they did not need to fork out thousands of dollars for someone to help them buy, especially after they were about to pay thousands of dollars for someone to help them sell.
Within 20 minutes, we showed them:
– How to get agents to pay attention to you when you are buying.
How to get all the research information you need on any property.
How to find properties before they go on-line.
How to write direct to owners and get them to agree to a fair price and conditions.
How to buy at less than you are willing to pay.
How to buy cheaply at auctions.
How to prevent other buyers from ‘knocking you out’ unfairly.
– How to negotiate with agents, most of whom are shocking negotiators.
RULE 4 – CHECK WHAT YOU ARE BEING TOLD
Never take an agent’s word for anything. Of course, they will tell you a property is a good buy. Of course, they tell you to act fast. Of course, they tell you they worked hard for you.
Sure, some buyers’ agents will refuse to work under these terms. So what? These are the wrong agents.
Make it clear that you will be checking all that you are told.
Before you buy any property, always check the sale prices of comparable properties. If you want to be secure, hire an independent valuer. If any group deserves to be known as the true heroes in real estate, it’s valuers.
Finally, of course, you can always contact Jenman Support. It may seem hard to accept that we help you for no charge, but we do. We work for personal appreciation as well as financial remuneration. Often, appreciation is all we receive. But that’s often good enough.
If you have used our help to sell, we will gladly help you at NO CHARGE when you buy.
All the people in this article are real and all said something similar: They wished they had contacted Jenman Support BEFORE they decided to sell or buy.
Rule 5, therefore, should be: When it comes to buying or selling real estate, CONTACT JENMAN SUPPORT BEFORE YOU SIGN ANYTHING.
Of the many promises we make you, one of our most popular is this: We will never ask you to pay or sign anything.
Everything we do for you is with NO OBLIGATION upon you.
Having our support is like being in one of those underwater shark-proof cages.
We will keep you safe.