Australian Property Market Update: Latest Data by State – November 12, 2024
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November 11, 2024
What are the fees for hiring a buyer’s agent in Australia?
Purchasing an investment property can be both exciting and challenging.
Making the right choice ultimately depends on having a clear investment plan, understanding your affordability, and being aware of what’s available in the market. This is especially important now, as property stock remains limited and prices, although cooled, are still significantly higher than pre-pandemic levels.
At times, it may feel like the entire market and everyone in the sales process are positioned to favor the seller. That’s where a buyer’s agent comes in with valuable market insights, providing the help and support you need to make informed choices. With their expertise, you can enjoy favorable positioning, making the journey more stress-free and strategic.
These professionals guide buyers through every step of the property purchasing process, from identifying suitable properties to negotiating terms and closing the deal.
An experienced buyer’s agent can help level the playing field, enhancing your property buying experience with their expertise.
However, this level of support typically involves a cost.
Here’s a full breakdown of everything you need to know, including what you can expect to pay in your state, for a transparent view of the process.
How do buyer’s agents get paid?
The first thing you need to think about when engaging a buyer’s agent is how buyer’s agents get paid, and how much.
Put simply, the buyer (you) is the person responsible for paying the buyer’s agent their fee or commission depending on your agreement.
This can be as one of 3 pricing models:
- A percentage of the property value
- A tiered fixed rate or,
- A flat fee.
This payment will be an out-of-pocket expense, meaning it cannot be covered by a loan or any form of financing.
Sometimes, a buyer’s agent may receive a commission from a developer or builder if the property you’re considering is a new development or a piece of land. If this is the case, you may want to run away!
Are they truly acting on your behalf? In reality, they represent the builder or developer, rather than acting in your best interest, even if they call themselves a buyer’s agent.
How much does a buyer's advocate cost?
As mentioned, buyer’s agent fees vary based on how they structure charges and the type of service you’re seeking. For example, a set fee to attend an auction may start from as little as $500, whereas a full search and negotiation service could reach up to 3% plus GST.
Here’s a breakdown of each fee structure:
Percentage of property value
Most professional buyer’s agent fees are calculated as a percentage of property value. This pricing structure means your fee is based on a percentage of the final purchase price of your investment property, which varies by budget. Much like selling agents, buyer’s agents operate under this model.
In Australia, the typical fee for a buyer’s agent ranges from 1.7% to 3% + GST, depending on the service provided. For example, the buyer’s advocate cost for a $500,000 property would be $10,000 for a 2% fee and $15,000 for a 3% fee. For a higher price property valued at around $1 million, these costs would increase to $20,000 and $30,000 for a 2% and 3% fee, respectively.
This transparent fee structure ensures competitive rates and helps clients understand the value of their investment with clear example calculations.
Tiered fixed fee
A tiered fixed fee structure means there is a set fee that varies depending on the property sale price, with the fee increasing as the sale price moves into higher brackets.
For instance, a buyer’s agent may charge a set fee of $5,000 for properties up to $500,000, then $10,000 for properties between $500,001 and $1 million, and $15,000 for the next price bracket, and so on.
The benefit of this structure is that, unlike a percentage fee, you know the upfront costs and the expected fee you’ll need to pay.
However, the negative aspect is that it can be costly if the brackets for each property sale price and their associated fee are large.
For example, if you were to buy a property for $550,000, you’d pay $5,000 more in buyer’s agent fees than someone who purchased a property for $500,000, even though the property sale price difference is relatively small.
Flat fee
A flat fee or fixed fee pricing structure means the buyer’s agent will charge you based on the service they provide, regardless of the final sale price. For instance, you may pay one flat fee for a buyer’s agent to bid on a property for you, a higher fee if you want them to source the property, and even more for a full service where everything is included.
Not only does the fixed fee differ by service, but it can also vary depending on the agent and your location. This structure ensures transparent pricing and offers tailored options to suit your specific needs.
Additional costs
While the buyer’s agent fee will cover the bulk of the cost of buying, there are other costs you need to take into account, such as fees for property assessment reports or due diligence fees. Added costs, like GST, will also be applied to any expenses incurred.
When engaging with a buyer’s agent, it’s important to ask for a full list of all the fees involved. This ensures transparent costs and helps avoid being caught out by any hidden costs, enabling informed decision-making throughout the process.
Typical buyer’s agent fee in Sydney
Sydney buyer’s agent fees generally range from:
- Percentage fee: 2% to 3% +GST of a property purchase price
- Fixed fee: Anything from $1,000 for auction attendance only to $30,000 for full services
In Sydney, most buyers’ agents will also charge an engagement fee, to begin with.
Is buyer’s agent fees tax deductible?
The Australian Taxation Office (ATO) has recently provided guidance stating that while property investors can claim the cost of fees such as regular management fees or commissions paid to a property agent for managing or inspecting the property and collecting rent on your behalf, there are limitations.
You are, however, unable to claim the cost of commissions or other fees paid to a real estate agent or any other person for the sale or disposal of a rental property. Additionally, buyer’s agent fees for engaging services to find a suitable rental property for purchase cannot be claimed.
This means that the cost of your buyer’s agent cannot be used to reduce your tax for the corresponding financial year. It’s important to understand these tax implications as part of your overall financial strategy.
BUT…
These costs may form part of the cost base of your property for capital gains purposes.
According to the ATO (Australian Taxation Office),
The buyer’s agent cost involved in purchasing your investment property can be included in the calculation of your property’s cost base, which covers the expenses related to the purchase, maintenance, and hold of the property. This means that your buyer’s agent fees can be included in tax calculations when you sell the property, potentially offering financial benefits. However, buyer’s agent fees are not tax deductible for owner-occupiers at any point.
This is not applicable if the property is for personal use, as opposed to investment purposes. Strategic tax planning is key to ensuring these deductions are appropriately utilized.
Note: Using a buyer’s agent can save you valuable time, money, and headaches, which is why they’re a good investment to make when buying your next investment property.
Savvy property investors are fortunate to have access to more professionals than ever before. However, with the growth of the sector, it’s important to beware of unscrupulous operators who may take advantage of less experienced buyers.
What many buyers don’t realize is that not all buyer’s agents are created equal. Many lack the experience necessary to handle such a crucial responsibility effectively.
That’s why it’s essential to conduct thorough research to understand exactly what (and who) you’re engaging with, as well as the associated costs.
This is where Ash Buyers Agency can help.
When you choose Ash Buyers Agency as your buyer’s agent, you gain access to our wide range of relationships, including local agents, finance strategists, building inspectors, our in-house team of property strategists, wealth advisory experts, and our renovations and development division.
For any inquiries or to learn more about how Ash Buyers Agency can support your property investment journey, feel free to contact us. Reach out to Ash Buyers Agency at +61 434 111 200 or send an email to info@AshBuyersAgency.com.au. We’re here to provide tailored guidance and insights to help you make informed property decisions with confidence.
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