Bryce Holdaway explains the difference between a buyer’s agent and a strategist and the questions you need to ask so you know the difference.
Kevin: Let’s look at the difference between buyer’s agencies and strategists. EmpowerWealth.com.au, they are buyer’s agents. Bryce Holdaway is with Empower Wealth and joins me.
Good day, Bryce. How are you doing?
Bryce: Hi, Kevin. I’m good. How are you?
Kevin: Yes, good, mate. Nice to be talking again. The difference between a buyer’s agent and a strategist: is there a difference, and if so, what is it?
Bryce: Yes, I think there is a bit of a difference. I guess the best way to illustrate it is through an analogy. If you think about someone who’s about to build a house and they have a block of land, they have a couple of choices. They could go and find an award-winning builder to build them a house and they just say, “Hey, there’s a block, go and build it.” That builder would build it with wonderful craftsmanship, and at the end of the process, hand them the keys over, and they’d be really happy with the house.
But what they may not have taken into account is the northerly aspect of the property, the floorplan flowing correctly, taking into account that they have young children now but they may need to separate some living areas as the kids get older.
Effectively, you would rely on an architect to help you do that. You’d go consult the architect and the project manager and say, “These are my goals, this is what I need, and then moving forward, this is how I need it to happen.”
I think that’s the best way to describe the difference between a buyer’s agent and a strategist. The buyer’s agent is the builder, so the buyer’s agent will go out into the field, find a really great property and do all the things you’ve asked him to do, but you really want a strategist to actually take a step back from the event of buying and look at the process involved.
Buying real estate in my view is the fourth step in a five-step process, and if you’re just going straight to step four, that’s effectively what a buyer’s agent does. But if you’re a strategist, you’re going to clarify beforehand, you’re going to evaluate exactly what you need, you’re going to put a plan in place, then you’re going to implement through the buyer’s agent, and the last thing you do is manage it and fine tune it and tweak it.
So, I think there is a difference, and I think if you can get a buyer’s agent who has a strategic mind to take a step back and see the bigger picture, particularly if you’re buying for an investment purpose but also for owner-occupier, that’s the type of buyer’s agent you really want to be involved with.
Kevin: When someone goes to talk to a buyer’s agent or a strategist, what sort of things should they have clear in their own mind before they go in?
Bryce: What they’re going to compromise on, because they will compromise on something. Unless you’re blessed with a lotto win or a big inheritance, most people are fixed on price, so therefore there are a couple of other variables, like location, size of land, and the quality of the dwelling.
Knowing in advance what you are prepared to compromise on is going to help you. I always say there are no “ten out of ten” properties but there are heaps of great “eight out of tens” and “eight and a half out of tens.”
If you know that you want shiny taps and brand-new carpet, and you’re fixed on the location and the price, you’re actually going to have to just compromise on the size of the land. You may want a house, but you might not be able to afford it and you have to do a townhouse, or even further, you buy an apartment.
If there are two people involved – husband and wife, partner, boyfriend and girlfriend, whatever it is – if they have an honest chat in advance about the big C-word – “compromise” – then I think that’ll set them up for a better experience.
Kevin: Is part of that compromise process the fact that we want more than we can afford? We go in with a shopping list which is almost like a wish list, but it’s maybe one that we simply can’t afford. Is that where the compromise comes in?
Bryce: Yes. It’s human nature, isn’t it? We all want a little bit more than what we have. You’re absolutely spot on. It’s amazing how if you have $600,000 to spend, your taste is something that’s $650,000. If you have $1.3 million to spend, all of a sudden, human nature says your taste is at $1.4 million. It’s the nature of the beast.
You just have to understand that if you want to renovate or detonate, then you can get a bigger sized land because you’re prepared to do the work, and that’s where your compromise might be. But for other people, they absolutely have to be in this location because of that school zone or because “My sister is across the road,” or whatever it will be.
So if you’re fixed on price and location, ultimately, you’re going to live in an older house on a bigger block or you’re going to live in a shiny house with a smaller block. That’s ultimately what it comes down to.
Kevin: Bryce, we know exactly how selling agents work, and they work off a commission base. How do buyer’s agents work? How do you earn your money?
Bryce: It’s kind of a mirror reflection. A lot of buyer’s agents do a percentage of purchase price. So, if you have a budget of $800,000, they may quote you 2% or 2.5% of the purchase price, plus GST, and that’s how they get paid.
I tend to go down the fixed fee path myself and at Empower, because if you’re on the seller’s side and you think your house is worth $700,000 and the real estate agent gets you $770,000, you’re happy to pay him a bit more because they got you an extra $70,000, so they’re actually worth paying a little bit more.
But on the buyer’s side, I don’t think it quite works, because if I have a budget of $700,000 and then I suggest that something is worth $770,000 and I encourage my client to pay that, they’re wondering, “Is this a good deal, or is this just because he’s going to get paid a little bit more?”
So, for me, personally, I prefer to go with a fixed fee quoted up front, but it’s a bit of both. It’s either fixed fee or a percentage of purchase price for most buyer’s agents.
Kevin: Great talking to you. Bryce Holdaway from EmpowerWealth.com.au, and also co-host on Property Couch. We’re out of time, but maybe next time we talk, we’ll have a chat about the podcast as well. Good talking to you, mate. Thank you.
Bryce: Thanks for having me on. See you, Kevin.