Buyer’s agents can do a very good job helping buyers find and purchase their property when the buyers are not familiar with the market or they have time constraints.
Sometimes buyer’s agents have the ability to smooth out transactions by identifying financing sources and solicitors or conveyancers to assist with the purchase.
If you follow these few simple requirements in relation to engaging a buyer’s agent, you should be well served.
Before you start
The most important thing that any person who wishes to engage a buyer’s agent is to ascertain that the buyer’s agent is licensed as a buyer’s agent (or as both a buyer’s agent and real estate agent) entitled to sell property.
The usual course when a property is put up for sale is that the vendor is required to pay the real estate agent’s fee plus any out of pocket expenses the agent incurs. The purchaser makes no contribution towards the vendor’s costs of selling the property.
When a purchaser engages a buyer’s agent, the purchaser needs to pay the buyer’s agent a fee. The vendor doesn’t pay that buyer’s agent a fee. If the buyer’s agent negotiates with the vendor’s agent then the vendor is required to pay the vendor’s agent a fee.
On other occasions there may be an arrangement between two licensed real estate agents by which a buyer will be introduced and a fee will be split. This would usually occur with the vendor’s consent. On those occasions the buyer would not usually pay a buyer’s agent fee.
What must a buyer’s agent legally do for the potential buyer?
The regulations to the property stock and business agent act lists a number of things:
- A statement of property details.At the time of entering into an agreement with the proposed purchaser, a buyer’s agent must prepare and give a statement of the property details that you sign. This specifies the details known to the agent, the type of property for sale and the details of any special instructions about the property to be purchased, i.e. whether it is vacant possession, whether it is strata title or freehold.
- Like all real estate agents, the buyer’s agent must keep the principal (the potential buyer) informed of all negotiations. This does not need to happen the buyer’s agent is bidding at auction.
- There is a legal requirement for the buyer’s agent to obtain the best possible purchase price. If the buyer’s agent fails to do that, they breach their obligations for ethical conduct and good practice.
- One of the most important aspects of these legal obligations is that the buyer’s agent is not to exceed the maximum amount of the agreed price that the buyer wishes to pay for the property.
This agreed price should be in writing, signed by the potential buyer and by the person authorised to negotiate the sale i.e. the buyer’s agent. If the property is being sold at auction, once the maximum price has been reached the buyer’s agent should not continue to bid.
- On occasions there may be an expression of interest and a deposit paid, i.e. if it is a new property and the development requires people the register and pay a fee for registration. If this happens and the buyer’s agent pays the fee, either with funds provided by the potential buyer, the buyer’s agent must let the buyer know that the deposit is refundable and there is no guarantee that the contract will exchange.
- One of the most important things that a buyer’s agent can do is not to demand or expect a fee for referring the potential buyer to the selling agent.
A final word
Remember at all times a buyer’s agent must be working for the buyer as the principal and looking after the buyer’s interests. A referral to a third party for financing or other work must again be made in the best interests of the buyer/principal.
Do you have more questions about using a buyers’ agent when purchasing property? If so, call us at JFM Property Law on 02 9331 0266 or email your queries to us at .