Why investors should consider using a buyer's agent: Q&A with REBAA's Jacque Parker

Investors have been active in the property market with many seek out properties by themselves, but some appoint a buyers’ agent to assist them with the process.

Real Estate Buyers' Agents Association of Australia (REBAA) president Jacque Parker talked to Property Observer about the kinds of property investors are looking for at present and why it’s worth considering the services of a buyers’ agent.

Why should an investor consider using a buyers’ agent?

The first reason is that you are given an edge by having an advocate on your side, just like when sellers engage a sellers’ agent.

Buyers’ agents are 100% independent because their service is being paid for by the buyer.

Not everyone buys property every day whereas buyers’ agents do that. They understand the complexities of the market and the process.

It’s important to have local knowledge of the market. Not everyone has that.

[Buyers’ agents] save time by doing the research and field work. As far as investors go, it’s narrowing down the suburbs, that will fit their budget and, if they have a strategy in mind, whether it’s a property that needs renovation or is in an area that offers potential capital growth.

What are investors looking for in properties at the moment?

Most investors that come to us are looking for properties at the low end of the budget.

[Some are] looking for low entry [price] suburbs where they can buy something and do a renovation. Because we have that market knowledge, we can suggest areas that might suit them.

Most investors are looking for something that they don’t have to do anything to. Most people who hire buyers’ agents are time poor and while we don’t manage the renovation, we can help them on that by providing names of tradespeople and builders. We can provide guidance on how to start.

Investors are looking for yield and capital gain. People say you either get one of the other, but that’s not true. I’ve bought properties in regional areas that have achieved great capital gains and delivered high rental yields.

It’s about what your budget can allow and your cash flow can afford.

What are you seeing in the residential property market?

Sydney is a sellers’ market. It’s an active market. There’s still more demand than supply.

The market overall is not one market though. That’s the trouble with any opinion from any so-called expert in the field. You are talking about a broad market. NSW is not one market. It’s made up of one huge capital city with lots of variation in its demographics, plus regional areas.

The market in the capital city has been very robust and over the past 18 months there have been many areas that have not boomed so much since 1993. It’s not sustainable, though. Property does have a boom, followed by slower growth and then plateaus out.

We don’t make forecasts but the key drivers are still in place because we have record low interest rates, increased consumer sentiment and positivity which goes a long way to accounting for activity and we still have affordable prices within Sydney and Melbourne.

Investors can still afford to get into the market for a reasonable amount and it’s relatively easy to get credit.

The past 18 months has seen all of those factors collide and there has been a boom in activity. It probably won’t continue, however that’s not to say it will go backwards. It will settle into a more stable and consistent growth pattern when interest rates start to rise.

Where are investors looking?

In Sydney, the median house price is almost $800,000. That’s not affordable. Most investors are starting off with units or looking further out for houses: Blacktown, Penrith, Campbelltown and to a lesser extent Parramatta. Regional areas have been attracting more interest as people can’t afford the capital cities.

Certainly there’s still a lot of interest in buying as close as possible to the city and maximising land value. Investors are trying to get the biggest piece of land they can as close to the city as possible and they’re prepared to go further out to get a piece of land.

Blacktown is still affordable for houses. Most investors buy properties under the $600,000 price range. Most people go in with $400,000 to $500,000.

What does REBAA do?

The Real Estate Buyers’ Association of Australia is the only national body for buyers’ agents. All of the members are independent and none of them sell real estate.

People are either an independent buyers’ agent or they’re a sellers’ agent that calls themself a buyers’ agent.

In the US, they have a model where the commission is split between the sellers’ agent and the buyers’ agent. Commission there for sellers is around 6%. In Australia, we don’t have that model. It presents a danger of conflicts of interest.

All the buyers’ agents who are members of REBAA are licensed and carry professional indemnity insurance, which is not mandatory throughout Australia. They have to be endorsed by two other buyers’ agents to gain membership.

How can investors tell if a buyers’ agent is independent?

You have to be careful. Check their license number with the state or territory Fair Trade website. Ask them if they sell real estate.

If they receive any form of commission from any selling agents they have to disclose that and that’s where it gets grey and murky. If they sell real estate, they are not a buyers’ agent.

A buyers’ agent is not selling you property. They are looking for property that meets your criteria and presenting those properties to you. It’s very different.

What about property spruikers selling to SMSFs?

It’s not a new problem but the fact is that some financial planners and advocates are asking for big fees from developers because they see it as an easy way to make commissions.

Buyers have to ask what else is out there that compares to the property they are being sold and realise that the recommendation is a clear conflict of interest.

Even if the fee is disclosed with the SMSF property developers the buyer ends up paying an inflated fee which covers the cost of those commissions. You are better off paying someone to look for property for you independently.

Buyers need to be a bit smarter when they go to anyone who is giving them advice and ask them why they are giving that advice. Knowledge is power. Don’t be afraid to ask questions.