Buying a house is a big financial commitment. In fact, it's probably the largest commitment most people make in their lives. Get this decision wrong and you could lose a great deal of money, get it right and it could set you up for life with a happy home as well as financial security.
However in the UK (unlike many overseas markets) real estate agents represent the seller and charge a fee based on the sales price so they are incentivised to attract the highest offer. The buyers' best interests are the least of their priorities.
A buying agent acts on the buyers behalf, looking after your interests, providing advice and guidance, helping you avoid the pitfalls and ensuring a successful purchase.
1. Who Uses a Buying Agent?
A buying agent is particularly helpful for busy professionals, overseas buyers and even first time buyers who may find the process daunting. Those looking for an investment or to add-value (through extending, reconfiguring and refurbishing) would also benefit from the use of a buying agent who has hands-on development experience.
In prime property markets such as Central London and the Home Counties where large numbers of properties are sold privately, off-market a buying agent can be invaluable, helping you to access the whole market.
In a hot market where properties go quickly, a buying agent with good industry contacts can get you first access. Conversely in a falling market, the buying agents who know who the highly motivated sellers are can be an advantage.
2. What Does a Buying Agent Do?
The primary role of a buying agent is to source a property for you at a good price. However they will also:
Access the entire market on your behalf (i.e. find suitable properties both on-market and off-market)
Provide sound knowledge of the local market
Offer a view of a property’s value using recent comparable sales in the area
Negotiate with the vendor on your behalf
Liaise with 3rd parties such as estate agents, solicitors, surveyors, architects and mortgage brokers to ensure the transaction completes successfully
3. What are the Benefits of Using a Buying Agent?
Good buying agents will give you an edge over other buyers. They will:
Save you money: through their knowledge of the market, contacts and negotiating skills they should be able to get you a good price
Save you time: they will work within your brief and only show you a shortlist of suitable properties, saving you considerable time
Remove the hassle: there are 3 parts to buying a property namely sourcing, negotiating and closing. Each can be stressful and time-consuming. A buying agent will do this work for you taking the hassle out of the process
Provide off-market access: in higher value markets a significant number of properties are sold off-market. For example 1/3rd of sales over £1m in London are off-market and this share rises to over 50% above £5m
Identify Value-Add and Capital Growth Potential: a home is not only a place to live but an investment. A good buying agent will be able to advise you on value-add and capital growth potential
Give you first-mover advantage: buying agents are known to local agents and will be the first call enabling buyers to view properties before they hit the open market
Provide you with Credibility: a buyer with representation will look more serious and credible to the vendor and their agent
4. Things to look for in a Buying Agent:
Value-Add & Capital Growth potential: a good buying agent will be able to spot potential, providing you with additional financial security in your home.
Strong Research Skills: this can be quite rare as many are former estate agents trained mainly in sales.
Valuation Skills: buying agents must be able to determine the fair value of a property by examining appropriate comparable sales. There are many nuances with individual properties so this is an important skill set.
Well connected: a good buying agent will be well connected within the industry to hear about off-market and soon-to-be-listed properties
Ability to Find the Motivation: The ability to find out why the vendor is selling and how motivated they are. (This can be achieved via connections, relationships but also through shrewd research)
Local Market Insight: the ability to recognise the subtle difference between locations in terms of price, amenities and upside potential
Strong Communication Skills: to interact successfully with 3rd parties such as conveyancers and surveyors to hold the deal together
Negotiation Skills: being a strong negotiator is not something that comes naturally to most people. It is important you employ a a buying agent who can negotiate successfully
Trustworthy: above all you must trust your buying agent and have a good rapport with them.
5. What are Buying Agents Fees?
Buying agents typically charge a Retainer (charged up front) of £2,000-£5,000 and a Success fee of 1.5% to 2.5% of the purchase price. The Retainer is deducted from the Success Fee.
The Success Fee is only charged if the buying agent successfully acquires on your behalf. Therefore if they haven't done their job, the maximum you can lose is the upfront retainer (i.e. £2,000-£5,000)
The buying agent's expertise in identifying a suitable property and their negotiation skills often results in a financial saving on the purchase and long term upside potential. This makes the service self-funding.
Lastly, Buying Agency Fees are tax deductible from any capital gains you make on the property when you sell.
The above is an article by Ludgrove Property. The company is rated one of the UK's best property buying agencies by Spears, Prime Resi and E-Private Clients. Case studies of their work can be found here.