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Should You Use A Buyer’s Agent?

Buyer’s agents are becoming more popular in New Zealand. What do they offer, who are they, and can they help you achieve a better return, asks Dan Dunkley.

By: Dan Dunkley

1 April 2020

For Jamie McKenzie, a 43-year-old video producer from Auckland, life was too busy to search for another property. With six homes in his portfolio, he wanted to invest in a new market, Rotorua, but struggled to look between work commitments.

“I was time-poor, with a business to run and a young family,” says McKenzie, who lives on the North Shore. “If I was looking locally, fine, but to go outside of my area, I just didn’t have the time.” Jamie eventually decided to use a buyer’s agent to find his next property.

After speaking to several, he settled on iFindProperty, an agent with national reach. The agent helped him locate two properties that matched his budget and investment goals in Rotorua.

“They did a lot of the running for me, got the information and the rental appraisal,” Jamie says. “They told me they needed some renovations, so I went down to have a look.”

After seeing the homes for himself, Jamie asked his agent to compete in an auction. He went back to Auckland and participated by phone.

“I ended up buying two properties right next to each other for about $250,000 each. They were rented out for about $230 a week, before. After six weeks of renovations, which cost $60,000, I have just rented one out for $430 per week.”

Jamie is convinced more investors should turn to agents for help. “Some people say they wouldn’t spend money on a property finder, but to me, that’s crazy.” He adds, “I don’t know what most people earn, but how can they afford to have the time to find properties, go to open homes, and make an offer?

It eats up so much time. There are far better things I could be doing with my days.”

A New Trend

In recent years, buyer’s agents have become increasingly popular across the Tasman, and grown in influence here, as buyers enlist a specialist to help secure their dream home.

Buyer’s agents can be a secret weapon for investors in a highly competitive market. A buyer’s agent is exactly what it sounds like; rather than sitting on the sellside, they are dedicated to prospective buyers and tasked with smoothing the process from search to completion.

Buyer’s agents scour the market for investment opportunities that fit a specific budget; negotiate on your behalf; arrange property managers and tradies; and ensure the investment can bring in the right yield. They usually charge a commission of roughly 3-4% of the purchase price.

A wide range of buyers can benefit from an agent, from first-time investors unsure about the market, Kiwis overseas looking for a slice of paradise back home, to investors looking at a new city or region.

WHY USE ONE?

When should investors use a buyer’s agent? What services do they offer and where do they unearth value? Are they an expensive, unnecessary middle-man in the home-buying process? Or an invaluable ally for investors?

Buyer’s agents have traditionally een more popular in larger markets, including the United States, where the home-buying process is more complex.

The buyer’s agent profession is relatively new in New Zealand, but specialist agencies have come to the fore in recent years.

Agents have become more popular as investors take a more professional approach. Buyer’s agents including iFindProperty and Erskine + Owen have emerged over the past decade, while investors including Wellington’s Peter

Ambrose offer investment coaching and guidance. Under the Real Estate Agents Act of 2008, all agents on the buy-side and sellside of a property deal must be licensed. After the act came into effect 12 years ago, some agents left the industry, but others stayed in the sector and obtained their REA license.

Buyer’s agents are now bound by the requirements of the act and the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Because of this, work carried out by an agent must be done under an agency agreement.

Since the introduction of the Real Estate Agents Act, the sector has evolved. Some companies, including Auckland Home Finders, specialise in private residential purchases, while others, including iFind and Erskine + Owen, serve the investor market. Alan Henderson, director at Erskine + Owen, says about 90% of his clients are investors. Most are “really busy” people looking to outsource the house-hunting process, he adds.

“Most haven’t got time to do it themselves,” he says. “Some Kiwis love the home-buying process; others want it taken care of.”

Henderson says his company often helps big city buyers invest in regional properties, and can identify up-andcoming areas for investors.Erskine + Owen also has an in house mortgage broker and arranges finance for clients. It also sources, negotiates, and conducts due diligence on properties, depending on what a customer needs.

Henderson says the buyer’s agent market has grown as people’s lives become more hectic.

“Cities are getting busier, and it’s harder to get around,” he says. “Why would you sit in a traffic jam when someone else can look?” Henderson says clients look for experience, a strong network, and negotiating know-how.

“We know what to look for,” he says. “We run a due diligence process that is more thorough than most people would conduct themselves, because our reputation is on the line.”

While some large real estate agents including Ray White have buyer’s agents in-house, Henderson warns customers they may be conflicted.

“We have a fiduciary duty to our clients. For a lot of the big real estate agents, the buyer’s agent is not representing the buyer. They’re representing the vendor.”

Nick Gentle, a co-founder of iFindProperty , says customers turn to his business for its network and knowledge of local markets. “We have a specialist in every area we operate in,” Gentle says. “People work with us because they get to work with an investor who knows the market, has access to deals, and can help you do it all.”

Working with a buyer’s agent involves a thorough review of your investment goals. Gentle says iFindProperty holds an initial meeting to look at budget and location and expected yield. Then, the investor is referred to a local agent, who conducts an in-depth assessment and proposes different properties.

After that, the search begins, including off-market and on-market assets. Gentle says customers don’t usually mind whether the property is on or off-market.

“If you’re in Auckland, and you want to buy in Rotorua, do you care about whether it’s listed or not? Or do you just care about if it fits your numbers? Most people only care about the numbers,” Gentle adds.

Gentle says clients come from “all walks of life”: “Kiwis overseas or those wanting to buy in other cities; or Aucklanders buying in the regions who can’t come to open homes. It’s a wide range,” he says. “We focus on the topline number they want, typically it’s a gross yield of 6-7 per cent, so we try and provide that value.”

Agents can help customers with auctions as well as standard sales: “It all comes down to the number and the confidence the client has,” Gentle says.

Do Your Research

While there are obvious advantages to using an agent, investor trade bodies warn buyers to choose their third party carefully.

The Auckland Property Investors’ Association warns investors to check their agent is qualified, represents their interests alone, and is a local market expert.

“Finally, be aware that agents are by their very nature, salespeople who are skilled at building trust,” guidance on the APIA website reads. “Before you charge your agent with the ability to spend a substantial amount of your money, make sure you feel comfortable enough to build a working relationship with them.”

Andrew King of the New Zealand Property Investors’ Association says an agent “should really be someone who acts for the buyer, who starts with a list of the buyer’s requirements and then goes to find them a suitable property.

This can save the buyer a lot of time, so can be very worthwhile paying for these services,” he adds. King says investors should be cautious when they use a real estate company’s in-house buyer’s agent, as they may only work with vendors through that company.

Establishing where the buyers’ agents’ motivations lie, and building trust, are critical considerations, King added. While many turn to a buyer’s agent to save time, using a high-quality agent can also reduce risk for investors. Henderson says buyer’s agents can help people “avoid mistakes” and take action to put their money to work.

“You might save a few bucks not using a buyer’s agent, but time and time again we get results for people,” he says. “In a rising market, people think they can do it themselves. They often come back to us frustrated when they’ve missed out on months of capital growth. You simply can’t afford to waste time. Don’t be penny-wise and pound-foolish.”

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