How do you find a good Buyer's Agent?
If anyone caught the Four Corners episode last night on dodgy real estate practises, you’d be forgiven for thinking it was going to be the same old argument about underquoting.
But then, along came some truths about ‘Buyer’s Agents’ and I nearly spilled hot tea all over my pjs.
I knew the industry was getting an influx of BA’s (Buyer’s Agents) who were eager to ‘hustle’ and ‘grind’ their way to a million dollars in income overnight, however the exposé piece touched on a mammoth conflict of ownership, cutting right to the core of what is rotting the industry and how consumers are not made aware of it. Rather than focusing solely on the problem, I’m also about helping find a way out of this mess. I’ve driven changes in ACT legislation which were enacted in 2022. These changes closed major loopholes and raised standards for agent licensing and ongoing professional development, but clearly we have a way to go.
As a consumer though, how do you find a BA who is worth their fee, and navigate an industry filled with ‘experts’ who may be wearing sheep’s clothing?
An easy place to start is REBAA. To even become a member, you must hold yourself to a higher standard and: 1. Not sell property 2. Not own or have an interest in a sales agency 3. Adhere to a strict code of conduct, which includes not taking secret commissions 4. Not sell property - it bears repeating. The list goes on, but to save you a lot of time here’s the shortcut to find a good BA anywhere in Australia.
Now, for those who would like to know the detail behind the due diligence of finding a good BA, here’s 10 steps for you to unearth any red flags. It’ll be great to know the answers to these before you hand over your money and put your faith in someone, to have some assurance that they will advise you in your best interest - glowing testimonials aside.
Check they are licenced in the state you are buying in. You’d be amazed how many BA’s are getting their licence in a different state than buying interstate, completely oblivious to (or choosing to ignore) the legislative requirements. This red flag is an enormous one, and should be assigned flashing lights and neon colours.
https://www.accesscanberra.act.gov.au/s/public-registers is the place to check a licenced real estate agent in the ACT, and you can google ‘real estate agent licence register’ + state/territory for any other jurisdiction. For a company, you want to see that it holds a company licence and also that the BA you’re working with holds the correct class of licence. If in doubt, contact Access Canberra (or the Office of Fair Trading in your area), or just ask the BA to produce their licence.Next cab off the ranks is an ASIC check. Hot tea aside, you’d be boiling from the inside if you learned that your ‘trusted advisor’ was actually in bed with a sales agent and you were the commodity! (I feel that’s at the core of what’s wrong - treating clients like income instead of people and chasing a shallow measure of ‘success’, but we can get to that). You can check the ownership details of any company here, but only limited information is available for free. The rest might cost you $9-20 and you’ll soon find out who’s in cahoots with whom. Look for a truly independent agent who can demonstrate they don’t buy from the same crowd time and time again.
A BA will send you an agency agreement before you start working with them. This document is signed by both parties (you, as the principal and the agent you appoint to work on your behalf). Agency law is quite detailed but there are some disclosure requirements. Under Part 8.13 of the Agent Regulations 2003 (which tells agents how to apply the Agents Act 2003, we’re talking ACT legislation here), the agent must disclose the nature of the relationship (if one exists) and the amount and nature of any rebate, discount, commission or benefit the agent may, or may expect to, receive by referring you. In short, they need to be telling you if there’s anything happening above - or under - the table. Ideally, this would be in writing. Developers are the obvious source here, but other agents are also a common source of referral fees that go undisclosed. My agency agreement states upfront that we don’t partake in any referral fees. None. I’m sure it costs me business because there are some in the industry who will choose to refer to those who provide an easy 20% of the fee for sharing a name and phone number (yes, it’s that simple), but our approach is to not pay nor receive any income from anyone other than our clients. Simple.
Beyond disclosure of relationships and kickbacks, the agency agreement should also be free of any attempt to restrict your free speech. AKA, a ‘gag’ clause. I’m skeptical of how well these would even hold up if an agent tried to enforce them, but the fact that they’re used at all is a massive red flag flapping wildly in your face. If your agent does a crappy job, please take this up with them in the first instance; tell them you’re unhappy and why, and if you don’t get any love via their dispute resolution process, take it to the regulators to make a complaint. In the ACT, that’s Access Canberra. I’d also encourage you to complain to the Real Estate Institute in your area, and put as much detail in writing as you can.
If they provide any guarantees of performance about a property, I’d also caution that’s a red flag. No one has a crystal ball and if they’re promising $X in rental guarantees or capital growth, you’re likely paying for it in hidden ways. We all want assurance about an uncertain future but I’d advocate for sound advice over the veneer of a ‘sure thing’. Financial planners and advisors are regulated but property advice is a minefield of cowboy advice and ‘experts’. Hard pass.
Ask the BA how they handle conflicts of interest. If they say, “There are none” or “We don’t have those” well hello, that’s an easy red flag. A good BA will have ways of handling any conflict of interest that may possibly arise, and will be able to tell you what their policies are, so that you know upfront where you stand should another client be after the same thing as you at any stage. Even if you don’t change your mind, another client might and you need to know how that will be handled.
On that note, feel free to ask how many clients they take on. The world of BA isn’t one that you can easily scale and retain quality while increasing quantity, and those who focus on volume have great difficulty avoiding clients with overlapping briefs. How much attention will they give you and your needs? If a great option comes up, can they drop everything and jump on the opportunity for you? Or are you one of many clients and will receive an according portion of their attention each week? We count our clients on one hand at any given time, if that’s an indication of how small scale our BA work truly is.
Time is an agent’s tool and a big reason why many clients engage a BA. Please do ask your BA before signing up exactly who will be inspecting the properties. A good BA will inspect the properties in person, or at minimum have a paid employee inspect for you. If they’re using ‘contractors’ or ‘local property managers’, how can you be assured that the BA has sufficient insight and area context to properly recommend the home to you, if they’ve never even seen it? Where’s the value there?? Red flags here for a BA who hasn’t even been to the property, let alone the town they’re recommending you buy into. ‘Borderless’ BA’s are on the rise and buyers are the ones relying on their ‘expertise’ in unfamiliar areas. Local knowledge, plus strong networks that have depth and quality to them are the secret sauce to finding a BA worth their money. These take time and transactions to earn; the trust is built over many years.
A good BA has built a strong network around them, and knows their patch inside-out. If they try to tell you how long they’ve been “in property”, clarify that timeframe. Is that time they’ve spent as a full-time BA, or in another capacity? Advocacy is very different to sales, which is different to simply owning property. Hell, I’ve been “in property” for 20 years now (yes, do the maths, I began as an infant haha - yeah, right), but I’ve only been a BA since 2014. ‘Passing off’ their experience in the industry is another red flag that I’d caution to look for; if they can’t even be straight with you on this, entering an ongoing relationship built on trust is off to a very shaky start.
Beware a ‘cheap’ BA. If you’re not paying for their time, advice and experience, I’d suggest someone else is chipping in to sweeten the deal. See points 1-9 above.
I’ve written before about how much does a BA charge, and that may help if you’re unsure. Some BA’s charge a flat fee, others are tiered, and some have a commission structure. You need to understand how it’s charged and ensure you’re fully informed before you sign on.
For those of us who’ve scrolled to the end for the summary, (TLDR or short on time?) here it is: Look for a REBAA member, ask the agent to clarify anything you don’t understand before you sign, and if you aren’t happy, walk away.
It’s not only your investment in the BA, it’s knowing that the property they’re recommending to you is in your best interests alone, and understanding how their role may be influenced by factors that muddy the advisory waters. You’re after a qualified and experienced professional, who demonstrates honesty in their character and commitment to the buy side of the transaction. If that means taking a few extra minutes to check credentials and ask some important questions, I would suggest that is time very well spent.
Caveat emptor - buyer beware.