|
Buyers’ advocates are turning the tables on real estate agents. But is the cost justified and what do you get for your money?
With the property market becoming increasingly adversarial, it was only a matter of time before the concept of buyers’ advocates took off.
In the US, around 80 per cent of real estate transactions involve an advocate. Just 2 to 3 per cent of Australians use one when purchasing a property. But that figure is growing as more and more time poor professionals and those jaded by the auction system turn to experts for help.
The concept is simple enough: buyers employ a real estate expert – the advocate - to help them locate and/or purchase a residential or investment property.
Advocates’ fees vary but most charge 1 per cent of the purchase price if the client finds the property, 2 to 3 per cent if the advocate finds and secures the property. This translates to between $4,000 and $12,000 on a $400,000 home.
In most cases advocates only get paid when and if they purchase the property for the client.
Christopher Koren and David Morrell, of Morrell and Koren, are arguably the most well known agents in the business. Their value proposition is simple. "Not only do we save (clients) money, we save them time," Mr Morrell says.
"We are there solely to represent the purchaser in the procurement and search for a new home. We may inspect 40 or 50 properties, we negotiate to buy the place at auction and for that we receive a fee.”
With a success rate at auction of 90 per cent, Morrell and Koren claim the advocacy system shifts the balance of power from agents to buyers.
There is no doubt that for busy professionals, an advocate can take much of the pain out of the property slog.
Advocates start by carefully formulating a budget and finding the best possible property to maximise their client’s investment.
When bidding at auction, advocates frequently use their insider knowledge to slow down the bidding, identify alleged dummy bids and force agents to reveal when properties are on the market.
Consumer expert Carolyn Bond, of Victoria’s Consumer Credit Legal Service, warns that buyers should approach advocates - or any third party in financial transactions - with caution.
Ms Bond says third parties can complicate transactions, particularly if things go wrong.
Others argue that advocates are a waste of money. Many estate agents already bid on behalf of clients - sometimes for no fee - as an act of goodwill or to secure new business.
What you get for your money
- detailed knowledge of recent sales
- up-to-date statistics and trends
- access to off-market sales
- aggressive, experienced bidding at auction
Advantages
- can save thousands by negotiating a pre-auction sale
- find the best property at the best price
- save time
- intimidate rival bidders thus removing them from the competition
Disadvantages
- agents say advocates drive up prices by increasing competition at auction
- may pay for service others provide for free
- adds to the purchase price
- difficult to quantify the benefit (i.e. you may have purchased the property yourself for exactly the same amount)
|
