There is always someone who will do it cheaper
I recently spoke to a prospect who was comparing our buyer’s agency service and price to two other competitors. All 3 of us were established, reputable, skilled, very experienced, and worthy of engaging, so it was a fair comparison. And yes, there was some variation in our fees.
In the end the prospect decided to engage someone else, who was significantly cheaper than all of us, based on them having ‘experience’ and some awards.
It turns out that their ‘experience’ was only 2 years compared to mine at 27 years, and 1 year of being nominated for 2 awards vs 10 years of consistently winning or being nominated for 25 industry awards in my case.
In this instance, this advocate is someone I call a FAKE buyer’s agent. And they are everywhere, desperately lowering their fees to buy business, given they have no negotiation skills, market insight, genuine experience or expertise to offer. But they have great social media!!
When the market goes quiet, those with expertise stay firm in their offering, while those without can only compete by dropping their price.
The prospect justified to herself that the similarities were sufficient to engage the other person to secure a fee saving, but she neglected to understand the distinction between ‘price’ and ‘cost’.
Price is what you pay. Cost is the consequence (good or bad) of that advice or service you receive.
Don’t be fooled. You always get what you pay for.
In this instance, the cost of poor advice from a cheap service offering or inexperienced advocate can include but not be limited to;
- Churn and burn style servicing – lack of attention to detail, competition for stock with other staff in the office so you don’t get shown listings, high focus on off market buying
- Transacting like a selling agent – highly staffed agencies need high a volume business to offset low fees. Another form of churn
- Poor or compromised property selection due to no real understanding of how to assess a property for capital growth
- Buying anything, anywhere at any price!
- Taking shortcuts which means leaving out significant parts of the buying process. They may not even know they are doing it!
- Little to no negotiation or auction bidding skills when it comes to buying the property.
- A tendency to always overpay at auction to secure a result and move the client on ( I have a high-profile competitor who often overpay up to $100k to get the deal done, but their fee is cheap by comparison!)
- No value add – the client could have secured the same result themselves (all things being equal)
- A habit of overpaying by purchasing most property off market and at a premium. Even when it’s compromised! Real estate agents know who the ‘sucker’ buyer agents are who will believe and pay anything they say, just to turn over a client and/or because they are ignorant of the properties genuine value and/or ignorant of devasting consequences to their clients when markets drop in value.
- Metro based BA's overpaying by 10 - 20 % on property in regional locations due to not knowing local prices, not using local comparables and NOT even inspecting them before buying
- Taking short cuts to transact quickly such as leaving due diligence out of the process that a good buyer’s agent would do – eg building and pest inspections
- Buying properties, a good advocate wouldn’t touch (especially many off market)
- Farming out the most important inspection part of their role to external contractors/3rd parties such as building inspectors or property managers who have no license or legal obligation to you.
All these consequences are far more costly than the saving some money on the fee of the cheaper buyer’s agent. And the consumer won’t know until it's too late. Either when the contact of sale is unconditional, when the bank valuation doesn't match the contract price, or in future years when the property has earned little to no capital growth and/or can’t readily sell without a significant price drop.
For example, a fake or new to the industry advocate may buy a poor performing property for $1 million.
It if grows at 3% capital growth per annum, it's worth $1,343,916 in 10 years
A highly skilled buyers’ agent will buy a high-performance property that delivers 8% capital growth per annum, making it worth $2,158,925 in 10 years.
The cost of poor advice is very real. In this case, saving a few thousand dollars on the service price, has cost this person $815,009 in equity growth.
| $1,000,000 Property | 3% CG | 8 % CG |
|---|---|---|
| Price in 10 years | $1,343,916 | $2,158,925 |
| Cost to use a cheap inexperienced Buyers Agent over 10 years | $815,009 |
We also know who the Buyer Agents are who do most deals off market, which means they are overpaying and/or often buying inferior property to churn a deal (and client) quickly, to offset cheap fees. Think McDonalds instead of fine dining. They need high client volume and fast turnover to make $$$. What you think you 'save' in the fee, you will lose in the buy price of the property, and this can be anything from $20k - $400k.
Eg One BA who buys 74% off market and proudly promotes this stat, is well known and LOVED by sales agents for their continual overpayments, at times up to $360k OVER the next highest offer. This confirms their sole strategy to buy for their clients, is to overpay every time.
Food for thought!
To think all buyer agents or property advocates are equal is a mistake too many prospective clients make.
Why would you entrust hundreds of thousands or millions of your dollars to someone who hasn’t served an apprenticeship in the industry, don't own property, learns on the job using you to 'practice ' on or doesn’t have a significant amount of expertise under their belt?
Don’t focus on price. Focus on skill, brand reputation, actual buyer’s agent training and experience, and value delivery.
In summary
- Ask what real estate industry and buyer’s agent experience they have. Walk away if they don’t have any!
- Ask them to demonstrate multiple case studies, over many years of their client success story’s
- Ask for past client testimonials spanning at least 2 - 5 years
- Explore their brand reputation, buyer’s agent experience, and value delivery. Don’t focus on price. Focus on skill, brand reputation, actual buyer’s agent training and experience, and value delivery.
CLIENT TESTIMONIAL
10/10 What can I say — Miriam and her team helped me find a beautiful home so quickly. Even with a wide brief that I provided, it didn’t take long to find a property that fit my liking perfectly. Miriam and her team are always accessible for a conversation about particulars or just to put your mind and nerves at ease. They provide a lot of information: from introductions to pre-auction strategy and beyond. Also, I will just say it — you absolutely get what you pay for. Property Mavens will work tooth and nail to get you the best deal, or they will tell you to walk away because it just isn’t worth it. That’s the kind of business they run. That speaks volumes to me about the team and it should speak volumes to you. There are plenty of agents out there willing to dust their hands of you. This team is not that. Regardless, the ball is always in your court, but sometimes it’s a big help to have someone show you where to hit it. Great people!
Stirling Rank
Property Prosperity
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