Are you knowledgeable and interested in property?
A buyer’s agent (or buyer’s advocate) is a licensed professional that specialises in finding, evaluating and negotiating the sale of property for a buyer. They do not sell real estate.
Only a properly licensed individual may work as a buyer’s agent. Each state and territory has its own licensing requirements, but in New South Wales a buyer’s agent license requires the individual to have completed a Certificate IV in Property Services (Real Estate).
Buyer’s agent services
A buyer’s agent will offer one or both of the types of services:
- A full service buyer’s agent: Will search for properties meeting a client’s criteria and negotiate the purchase of the property, whether it’s by private treaty or auction. The buyer’s agent will accompany their client on inspections and deal exclusively with the real estate agent.
- A buyer’s advocate: May be engaged to bid at the action of a property that the buyer has found themselves.
Fees and payment
There are three ways a buyer’s agent might charge for their services, although each will charge an engagement fee before they begin looking for a client’s property:
- Percentage of the property’s sale price, usually between 1 and 3 percent
- Flat fee of somewhere between $5,000 and $15,000
- Tiered pricing structure, based on the value of the property.
Some buyer’s agents will defer final payment of their “success” fee until settlement of the property, but others require payment once the contracts are exchanged. Fees are paid directly to the buyer’s by the buyer — finance will not cover the cost of a buyer’s agent.
If the buyer is a property investor, the fees are deductible. Buyers who intend to reside in the property must wear the cost themselves.
A buyer’s agent must provide their client with an agency agreement, which sets out the terms of the arrangement, the duration, and the fees payable by the buyer. The agency agreement should cover the following:
- The terms and conditions of the agreement, and how it can be terminated
- How often feedback will be provided
- When signing an agency agreement, the agent is required to prepare and provide a statement of property details. The agreement must specify:
- Details known to the agent of the type of property to be purchased
- Details of any special instructions about the property to be purchased — i.e., requirement for vacant possession
- The agent is required to obtain the best possible purchase price.
- The agent is not to exceed the agreed purchase price in negotiations or at auction without the buyer’s express written authority.
- That even though an engagement fee has been paid, there is no obligation for the vendor to sell the property or for the buyer to purchase the property. The agent must also inform the buyer when they become aware of any subsequent offers.
Does a buyer’s agent need a trust account?
Because a buyer’s agent works on behalf of the buyer only as an advocate or proxy, they do not require to hold money in a trust account. Any funds coming to the buyer’s agent is payment for their services.
Although a buyer’s agent may negotiate on a buyer’s behalf with a conveyancer, they do not accept money for a deposit on a property, nor do they pay this money on a buyer’s behalf. Therefore, they don’t need a trust account.
If the client changes their mind
A buyer’s agent’s engagement fee is usually non-refundable and it should compensate the agent for the initial time it takes to locate property for their client. If the client changes their mind or finds a property on their own, the engagement fee won’t be returned to the buyer.
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