Warning Real estate agents aren’t your friend
I think real estate agents are in general friendly people, and while they will try to help you as much as they can in the home buying process you need to understand who is working for whom.
Clever home buyers understand that it is the real estate agent’s job to work for the seller of the property, and not the buyer.
Now I don’t want to sound cynical against the real estate agent industry, I have friends who are agents, but the fact is that a selling real estate agent can’t work in the interests of both the seller and the buyers. They are employed by the person selling the property and they are legally (and I suppose morally) obligated to work for their client — the seller — and not you, the buyer.
I’ll be honest, I’ve made this mistake before and trusted the real estate agent by sharing a little bit too much information — on one occasion I told the agent that I only had a small 5% deposit. And while I could never confirm that’s the specific reason I missed out on purchasing that property, the fact that the real estate agent knew that could allow them to prioritise an offer with a larger deposit (larger deposit means a higher chance of getting the loan approved) over mine.
Either way, by misunderstanding the real estate agent’s role and giving them too much information I missed out on that property. With all that being said, it’s worth remembering that real estate agents can still be a good source of information.
How to Deal With Real Estate Agents
Remember, a good real estate agent will work hard for the seller to get the best price so they aren’t working for you as the buyer, and most agents are paid commission to sell the property — and as harsh as it might sound they won’t waste time on buyers who are unsure or unwilling to commit.
You need to put your best foot forward, and by asking the right questions you can quickly identify potential issues on the property, get a better idea on the value of the property and the seller’s motivations, and make an offer that will put you way ahead of your competition
- The more the agent likes you, the more information they will give you.
- Find out as much as you can about the vendor, other competing buyers, and terms they are looking for.
- Asking questions allows you to position your offer strongly, without focusing on price.
- Try not to give away too much about your position, like the amount you have been pre-approved.
Questions to ask a real estate agent
1. Why are they selling the property?
This is a great starting point and gives you a solid understanding of the seller’s timeframes. Some real estate agents might not be comfortable discussing these details with you, but any information you can gain here gives you a better idea on what type of seller you are dealing with, and what items might help position your offer stronger than others.
For example, a seller who has bought another property might be keen to sell their old property quicker and are less sensitive on the sale price. You could offer a lower price but with fewer days for due diligence or finance to put your offer ahead of others.
2. How long has the property been for sale?
The amount of time a property has been for sale on the market will ultimately influence its price. When a house is initially listed for sale it becomes an interesting property for both real estate agents and prospective buyers for the first 14 – 21 days. If the house hasn’t been able to find a buyer after 60 days, it becomes stale and is generally much harder to sell because there is limited interest, there could be issues with the property or the price being asked is too high.
For this reason, it’s important to take your time to find out why the property has been on the market for so long — maybe other buyers have struggled with finance? Have there been problems with valuations?
On the other hand, some others are happy to wait years for an unrealistic price, while other sellers could be desperate to sell and may accept a low offer. Another thing to look out for is if the real estate agent’s contract to sell the property is about to expire (usually 90 days), then the agent will get onto your side to get the seller to accept a lower offer.
3. What was the original asking price?
It is worth asking the real estate agent what the original price range was on offer and getting a bit of a history on the sales campaign so far. You can ask them how many offers are made, and the prices being offered. If they were declined by the seller, or if they were accepted, why the deals fell through?
Investigating these areas gives you a clear idea of what the seller is expecting, and how much the previous interested buyers thought the house was worth. Asking these sorts of questions will present you as an informed buyer rather than a first timer!
4. Are the sellers ready to negotiate on price?
You might find a home you really want to purchase; that’s great! Don’t feel bad asking the real estate agent if the seller is ready to reduce the price — they could give you some valuable information even before you make a deal. As a general rule of thumb, and depending on the location, Australian properties sell up to 10% less than their original asking price. This is known as vendor discounting; you can see what the average discount in your suburb is on RP Data.
5. What’s the lowest price they are willing to accept?
Another worthwhile question to ask is the lowest amount the sellers will accept. In some cases, the real estate agent will just tell you — in others, they might give you a bit of a hint. The real reason in asking the question is to get a better understanding of the minimum price; if the real estate agent quotes $500,000 then you can understand whether you can really afford the property.
We’ll be coming back to these questions in chapter 7, making an offer.
We’ve put together the ultimate property research checklist to (1) research your suburb and surrounding area, (2) determine potential weekly rental and (3) calculate the property’s value. At this point, it could be worth obtaining a bank valuation prior to the auction, which Hunter Galloway can assist with arranging.
Property Research Checklist: