The pros:
Propertybuyer.com CEO Rich Harvey says that, along with helping with investment strategy and selection criteria design, the three key areas an agent can add value are:
- Time saving: they know where to look and can short list a more extensive range of suitable properties efficiently.
- The appraisal stage: they know how much to pay and can provide the latest market knowledge and research.
- Sealing the deal – ie: negotiating and exchanging.
“But not only does an agent add value in terms of individual property selection, they also help to educate their client about the process along the way – in order to help set them on course for future investment.”
The cons:
Unfortunately, there are some unscrupulous agents in operation, Results Mentoring coach Brendan Kelly says. Such agents pray on the naivety and vulnerability of beginner and/or time-poor investors.
Kelly says that there are two main areas investors should be careful of when working with an agent. They are:
- Vested interests: Some agents tout deals which involve commission or even kickbacks from a developer or seller. This means they are not giving investors independent, unbiased advice. It can also result in hidden costs for the investor.
- The information provided: Some agents give investors information which doesn’t manipulates the numbers and costs involved. This allows them to depict attractive deals of great profit and rental returns – when they may not be an accurate depiction of the reality.
Kelly says he is a big believer in building wisdom and personal upskilling, but warns that, even after doing so, there are still risks for the novice investor.
The costs:
Harvey says an agent’s full service fee is typically around 2% + GST of the purchase price. However, some agents will negotiate a set or fixed fee in advance. Also, some agents offer “negotiation only” and auction-bidding services.
Top tips for choosing a good agent:
- Establish an agent’s independence: Find out if an agent takes sales commissions for agents or developers. If they do, they are not independent or unbiased.
- Investigate an agent’s track record: Do they abide by a Code of Ethics? Have they received external recognition for their work (ie: awards)?
- Look into an agent’s credentials: Are they a member of REBBA, PIPA and the relevant state institute? What qualifications do they have?
- Get testimonials and references to find out what sort of service an agent provides and the type of results they can deliver.
- Determine whether the agent has good research capacity and access to comprehensive data sources.
- Find out whether the agent has a valuer on their staff.
- Identify whether the agent walks the talk – ie: are they an investor themselves?
Harvey says collaboration, the willingness to listen and an open mind [on the part of the investor] are the key to a successful partnership with an agent.
Meanwhile, Kelly recommends that an investor knows their numbers, has done their due diligence and requests full disclosure. This will help them better understand whether or not the deals being suggested to them are in their best interest, he says.
Finally, it should be noted that if an investor pays attention to the work of their agent they can learn a lot about property investment and the strategies, techniques and research it involves.
