How much does a buyer’s agent cost?

February 2nd, 2022

Find a fee structure that puts Sydney property buyers in the driver’s seat.

If you’re reading this, you already know there is value in a buyer’s agent.

You’re financially prepared to buy a Sydney property and curious about what it costs to streamline this complex process. You’ve possibly Googled ‘Sydney buyer’s agent’ and found copious options to choose from. There are many case studies with happy clients that agree, the value of a buyer’s agent is real.

You are wise to work with a property buying expert. Sydney property is a significant investment.

A buyer’s agent fee can be confusing and often different words explain the same type of fees. Put simply, there are two types of fees for a buyer’s agent:

A non-refundable Retainer and a Success fee. Both are explained in detail below.

For buyers to stay in the driver’s seat, the key is to find a buyer’s agent with simple fees and a pricing model aligned to your interests not the buyer’s agent holiday fund.

Sure, there is a cost for a professional service, but Curtis Associates want you to get value for your money. Here’s everything you need to know about a buyer’s agents fees.

 

Firstly, what to expect from a buyer’s agent?

Shop around before you pay any fees. Buyer’s agents work differently.

There are two main services you can receive from buyer’s agents which impact the fees.

  1. “You find we buy” service. The client finds the property and requests a buyer’s agent to complete due diligence and negotiate the sale on their behalf. The associated cost for this service includes a Retainer fee to cover the initial engagement process and a Success fee to cover the purchase process. The only other cost for this service is categorised as a Success fee, sometimes known as a “purchase” or “final” fee.
  2. “We find we buy” The client can switch off all notifications and the buyer’s agent will do the rest, including:
  • Take a thorough brief from you.
  • Offer impartial advice on the Sydney property market segments.
  • Find properties for you, both on and off market.
  • Present a shortlist of properties that matches your brief.
  • Negotiate private viewings.
  • Negotiate the property sale for you.
  • Deliver all this within 3-4 months.

The cost for this service would include a Retainer fee (expect it to be larger than the “You find we buy” service) and a Success fee. Sometimes it’s noted as a “total fee”.

 

A Retainer fee sets expectations

It’s a non-refundable, pre-set fee to kick-start the search process and engage the client. It remains the same amount for any type of property. It can be noted as an “engagement” or “upfront” fee. Curtis Associates refer to it as the Retainer.

A Retainer contractually engages the buyer’s agent. It covers the consultation, research process, and sets up a shortlist of properties for the client to inspect. A shortlist should align closely to the buyer’s personal brief. An independent buyer’s agent will have a broad network of sellers to contact, often a network like the one Curtis Associates enjoys, has taken decades to establish. The process takes time, resources and expertise, it’s a key cost for buyer’s agents, so it’s fair to charge for this service. A Retainer should also absorb all fees incurred by the buyers’ agent without there being any additional disbursements. It does not include legal fees to advise on contracts, building, pest or strata inspections or other services provided direct to the buyer by professionals other than the buyers’ agent.

The Real Estate Institute of Australia (REIA) recommend buyers’ agents include a Retainer fee. Buyers can be confident that if a buyer’s agent charges a Retainer, they are running a sustainable business. It’s reasonable to expect a Retainer fee to be upwards of $3,000 ex GST.

Critically, the Retainer fee should be linked to a reasonably short timeframe (say 3-4 months). This contractually connects the buyer and the buyer’s agent for that timeframe, so be wary of a clause that states anything longer, say 6-12 months. For most clients, a search should not take that long. The only exception would be for a very rare or expensive property search.

A fee structure that simply states the Retainer fee amount and its associated timeframe will set realistic expectations upfront. Inherently buyers are in control and can choose to engage or not, based on this cost.

 

What if there is no Retainer fee? Be cautious and ask loads of questions.

The buyer’s agent may not have the resources to deliver a thorough or customised search for you. They may be inexperienced or may not be an established business. Worse, they may sting you with a huge “Total fee.” Read the fine print and ask them to explain it to you.

 

A caution on property shortlists

If you’re down the path with a buyer’s agent and wondering, is it worth it? Put the brakes on when the shortlist of properties is presented to you. A buyer’s agent who offers limited options in the shortlist may also carry a conflict of interests. A couple of key cautions can be noted at this point in time.

A comprehensive search has NOT been completed if the property shortlist offers;

  • Zero off-market properties.
  • Only properties from within the same proprietary (selling) agency.
  • Properties that do not reflect your brief, including budget.

If an agency both sells and buys property or also manages properties they buy for clients in a vertically integrated business model, you must ask how these services are separated. It will ensure your interests remain front of mind and avoid a conflict of interest. Beware of ‘one stop shops’.

 

How is a Success fee calculated?

A Success fee is separate from the Retainer because it’s only payable upon a successful property purchase. It can also be noted as a “purchase” fee or “final” fee, Curtis Associates refer to it as the Success fee.

Once you’ve chosen THE property, a buyer’s agent conducts due diligence and negotiates the sale price on your behalf. The Success fee covers this process.

It can be confusing for clients because traditionally it’s a commission-based fee. It’s calculated as a percentage of property sale price. The REIA notes the industry standard for a Success fee is between 1-3% of the property sale price.

The most popular pricing model for buyer’s agents is to reduce the Success fee as the property sale price increases. Inherently this fee structure is in the buyer’s interests, keeping the sale price fair. It negates any incentive for the buyer’s agent to boost the sale price above market value and instead fairly renumerates them. It provides balance and value for both parties. Plus, if a buyer is not happy with the sale price and negotiations fail completely, they don’t pay the Success fee. A Success fee structure should be one that puts you, the buyer in control of the value proposition.

Some buyer’s agents promote a fixed Success fee, but it can be disproportionate to the sale price, so be wary. The percentage model sets clear expectations. Fundamentally, it aligns to the client’s interests who can put the brakes on anytime.

For most clients, a Success fees will sit at around 2% of the property price. Minor shifts up or down are trivial. Curtis Associates set Success fees on a scale and in price bracket blocks. So, a property valued between $3 million – $3.25 million would have the same Success fee. As the sale price increases, the fee shifts accordingly. This creates transparency for both parties. The buyer’s budget, the agent’s negotiating boundaries and the fees are all clear ahead of the purchase.

 

Keep it simple

The cost of a buyer’s agent should be simple, transparent and in the buyer’s interest.

Be wary of confusing fees. Remember this,

Retainer fee: Fixed, non-refundable and upfront. Expect upwards of $3,000 ex GST.

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Success fee: A percentage of the property sale price (1-3%) and within a price bracket blocks

These fees should cover all disbursements, excluding fees charged by service providers, which are independent of the buyers’ agent.

For in-depth property buying advice, analysis and research from a team that doesn’t manage property or act for vendors and is therefore genuinely an ‘exclusive buyers’ agent’ – get in touch. We’ll walk you through fees in the first meeting.

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Speak to Chris now to find out how he can help you. Call us on +61 2 9238 8089

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