What does a buyers agent cost?
Most people ask ‘What does a buyers agent cost?’, but like many professional services, the services provided by a Buyers Agent can vary in both the scope and the fees charged. This article will break down the various ways that a buyers agent might charge for their professional assistance when sourcing a new home or an investment property for their clients.
Firstly, it is important to understand not just the price that a Buyers Agent will charge, but gaining an understanding of the value that they might add during the purchasing process is equally important. When prospective clients contact us, we always know that our professional fees will be assessed alongside any other buyers agency that an individual might speak to. Therefore, as a business, it is our job to help property buyers move beyond the question of “What does a buyers agent cost” and help them to consider the question of “What value can a Buyers Agent add for me?”
What does a Buyers Agent cost based on different fee models
Most buyers agents will charge either a fixed fee or a commission based on a percentage of the purchase price for a full-service offering. The scope of what might be included in that full-service offering, of course, can vary widely from one buyers agent to another, so selecting a service provider on price alone can be a big mistake.
Fixed Fee Buyers Agent Service
Fixed Fee Buyers Agents may set a fixed price for all clients, regardless of what or where they are looking to buy. Buyers Agents who set their fees based on this model, usually have a focus on buying over a larger geographical area where they may have a LOT of properties to choose from and the types of properties that they are looking for may be more generic.
Under the fixed fee model, the service fee for a full-service offering can be as low as a few thousand dollars, or it can exceed $15,000. Obviously, under this model, the Buyers Agent usually buys the same type of properties that are all around the same price, but regardless of the purchase price – the fee remains the same.
Tiered Fixed Fee Buyers Agent Service
Alternatively, Buyers Agents may charge a fixed fee that is tiered based on either the property value, the location or both.
Under this model, the fees might be agreed upfront but based on a structure whereby as the value of a property increases, so too does the agreed total fixed fee.
|Purchase Price||Fixed Fee (+ GST)|
|$750K to $1M||$17,500|
|$1M to $1.5M||$20,000|
|$1.5M to $2M||$25,000|
|$2M to $2.5M||$30,000|
Why are the fixed fees tiered for some Buyers Agent cost?
When purchasing a property, the difficulty level of the search based on the client’s brief, and therefore the duration of the service provided by a buyers agent, can be variable.
When asking the question “what does a buyers agent cost?”, it is sometimes difficult to obtain a quick quote without providing the buyers agent with a more detailed understanding of type of property you are looking for as well as what locations you are looking to target.
It is common in capital cities, for example, that the homes in suburbs that are closer to the CBD attract a higher price, but they are also in a more limited supply. There is justification for a higher service fee when the amount of work required to find the right property in an area where there are fewer opportunities to consider results in a longer service duration.
The type of property that a buyer might be looking for could also be unique or scarce. For example, a buyer might be looking to buy on a particular street or the requirements for the home might limit the number of opportunities that could become available to them. This usually means that the duration of the search becomes a lot longer. You can see why there is no one-size-fits-all answer to the question “what does a buyers agent cost?” as it often depends on the scope and the search criteria.
Most Buyers Agents will seek to understand what type of property you are looking for as well as what locations you are considering before they will provide details of their fees for services based on a full-service model.
Commission Fee Buyers Agent Service
But how much does a buyers agent cost?
Buyers Agents who charge a percentage of the purchase price for their services use a commission-based feed model.
In this instance, a fixed commission is charged based on the purchase price of a property. Under this model, answering the question of what does a buyers agent cost, usually comes with a response based on the percentage of the property purchase price.
There is often objection to this type of model, especially when the role of a Buyers Agent is to get the best possible price for their client, so being financially incentivised for paying a higher price is counterintuitive. Regardless, this model is still very popular.
The percentage charged is usually a reflection of experience and service inclusions. Some Buyers Agents charge as little as 1 to 1.5% whereas others can charge up to or over 3.5% of the purchase price (plus GST).
When are Buyers Agents Fees Payable?
When people ask the question “what does a buyers agent cost”, it is also important to consider if there are any “additional” fees payable over and above either the fixed fee or the commission fee described above.
Most buyers agents will charge an Up-Front fee, or an Engagement Fee, and then a final fee upon purchase. There are other arrangements whereby the final fee might be payable via a monthly retainer during the search period, until the full fee is paid. But how these fees are charged can vary from one buyers agent to another.
Up-Front Fee or Engagement Fee
The Engagement Fee is payable at the commencement of the service. Some Buyers Agents charge an up-front fee that is IN ADDITION to the other fees quoted above, whereas other Buyers Agents will include the up-front fee as a portion of their total fee payable. It is always a good idea to check what arrangement a Buyers Agent has in place so that you can understand all of the costs involved in engaging this type of professional service.
So, how much does a Buyers Agent cost?
This article highlights that there are various fee models in place, and the cost of engaging a buyer’s agent to represent you will vary between different service providers. We hope that you have a better understanding of how much a buyers agent costs.
Like all service-based businesses, you generally get what you pay for. The level of service, professionalism, experience and results are often a reflection of the price that you pay.