Why is it Important to Find Out How Your Property Agent is Paid

Updated: Jun 18


Is there really a free lunch? Are free buyers agents in the sales agencies really helping you?

Before you engage the services of a real estate agents, including buyer agents (or buyers advocates), have you ever wondered how they are paid? This is a fundamental question that you should know and will help you understand who your agent is working for.


Here in Australia, buyers agents (or buyers advocates) are everywhere. Just like a real estate sales agent, there are too many to choose from. There are the legitimate, licenced and insured legal buyers agents, and there salespersons who fly by night, here today, sell you a house, and disappear by night. Then there are the sales agents who are also willing to help you buy properties that they are selling, without charging you any fees. With so many to choose from, how do you know who are the legitimate, genuine Buyers Advocates (or Buyers Agents)? How do you know who are the ones you can really trust?

And, is there really such a thing as a free property buying service? Everyone wants a free thing or two. But what should you know about the "free" buying agents? It may shock you that they will more likely than not, cost you hundreds of thousands more, without you even realising it.


This is something very difficult to for consumer to differentiate without understanding the fundamentals. We will explain the different types of 'agents' in this blog. By the end of this article, you will know how to differentiate the legit buyers agents from the sales agents masquerading as fake buyers agents. You will also know how to identify and choose your buyers' agents.


Understanding the Real Estate Agent Regulations

Why do real estate agents have to be licenced?

First off, let us explain the basics. Why must real estate agents be licenced.


Everyone knows real estate transactions typically involved millions of dollars. It is usually a big ticket item which most buyers are buying blindly. Not many buyers really know the whos, what's, whens, wheres, whys of buying a house. And because of this, there had been too many scams by dodgy salespersons. It is therefore necessary to enforce licensing of real estate agents, to protect the consumers.

In fact, anyone helping to sell or buy properties are, required by law, to be licenced. This licencing requirement helps to ensure the agents know their code of conduct, and helps protect the buyers' and sellers' interests in a real estate transaction. In Australia, this code of conduct and regulations are state based, and each state has a slightly different set of regulations. But the regulations are largely similar. The need to protect property buyers and property sellers are very well spelt out in these regulations.


Here are what you should know, before you engage your real estate agents who are willing to help you buy your property. And here is why your "free property buying service" will cost you hundreds and thousands of dollars.


But first,...


How are real estate agents paid?

Like any other professions, the professional real estate agents need to get paid for their work. No one is expected to work for free. Not in Australia, at least. True Australians always pay fair price for the goods and services. True Australians believe in being fair.

And, this is one thing you should always remember. Simply by paying for the services of the real estate agent, the payor would make themselves the employer, or the "principal" of the person getting paid. This is a very important basic concept, in any transactions. All property agents know this. And all buyers should know this.


Who do real estate agents work for?

Even though real estate agent licensing and regulations are managed by each individual state, the regulations are largely similar. The regulations states that real estate agents should ALWAYS protect the interests of their principal. They have to protect whoever pays them and engage them for their services. In Victoria, this is spelt out clearly in Part 2, clause 11 of the Victorian Estate Agents (Professional Conduct) Regulations 2018 S.R. No. 49/2018.

An estate agent or an agent's representative must always act in a principal's best interests.

There are no ifs, no buts. This clause might be worded slightly differently in different states, but it is essentially the same throughout Australia.


What you should know about buying real estate

If you are intending to engage a buyers' agent and you are hoping to get one of the free buying services of a real estate sales agent, you should think twice. The free service will cost you dearly. And the following sections will explain why.


Who is really paying for the free property buying services?

No one is going to work for free. The agents have a family to feed. They have a mortgage to pay. They have a fancy car loan to pay. If they are not paid by you, how do you think they are paid?


Yes, you are probably smart enough to know by now, if your "free buyers agent" is not paid by you, the buyer, they are paid by the vendor / seller / developer of the property. And simply by receiving payment from the seller, even if it is on a co-broke or conjunct basis, it makes the property vendor / seller / developer the "free" agents' principal. IE, your "free" real estate agent is working for the seller, not you, as the buyer. They are working with the seller to get you to pay more, so they can "help" you secure the property. They are working against you. Remember Part 2, clause 11 of the Real Estate Agents Professional Conduct Regulations? The estate agent or agent representative must always act in the principal's best interest.


The Principal is whoever pays the agent, and by being paid by the seller, it makes the "free buyers agent" the seller agent. It does not matter what these "free" agents tell you. The regulations mandates that the agent must always act in the best interest of the payor. Which, in the case of the"free" buyers agent, is the seller. And by being the selling agent, they have to protect the interest of the seller. There are no other ways, without violating the regulations. So, as with all sellers agents, these "free" buyers agents will almost always aim for the highest possible price because their commissions are directly tied to how much they can sell the property for. It is sad that in the pursuit of "free buyer agent" services, many people are in fact, being unknowingly lead to paying more for their properties.


This is an important fact in the regulations that no seller agents wants you to know. Remember their favourite sales pitch? "Let me help you get this property"... Now that you know their secret, do you think they are really helping you? Who are they really helping? Being the protector of the seller's interest, they will always come back to you to ask for more money. All sales agents are trained to extract the most out of you.


What do you need to know when you engage a free buying service?

Now that you realise those 'free' buyers agent services are not working in your favour, what can you do? Always do your own diligence. Even if these "free agents" have claimed to find one that is the best for you. Remember these agents are working against you. They are paid by the seller and will therefore, have to protect the seller's interest. The "best property for you" that they have recommended usually means the highest commission they can receive from the seller and it is usually not be the best for you. Or it could be that one property that they had been trying to sell for too long. They might have come across the property that suits you perfectly, but they are not going to recommend that because they are not paid as much in commission.


How do you find genuine real estate Buyer's Agent to work for the buyer?

You can turn the tables, by engaging a genuine buyer's advocate (alternatively known as buyer's agent). They are the real deal. They are the one who will protect your buying interest and look after your purchase. That one that buyers can really trust.


How do you identify who are the real buyers agents? Now, remember the agent is legally required to look after the interest of their principal. IE, whoever pays for their services. If you are paying for this buying services, the agent has no other choice but to look after you, and ensure your purchase is in your interest. And this usually means helping you negotiate for a lowest possible price, or package your offer for the best purchase outcome. In almost all instances, your savings will be worth more than their fees. With our buying services and fees structure, our clients are usually saving 10 to 13 times more than our fees.

13 times return on investment (ROI)? Now are you interested?


How do you find a legitimate Buyer's Agent?

Now, you will be asking, when you have paid for the buyers advocates services, how can you be certain that they are working in your favour? If you have engaged a licenced real estate buyers agent, you do not have to worry. The Real Estate Professional Conduct Regulations ensures that. Part 2, clause 8(1)(a) of the Estate Agents (Professional Conduct) Regulations 2018 S.R. No. 49/2018 addresses this. An agent or an agent's representative must not accept commission from the seller of real estate when engaged to purchase that real estate on behalf of a purchaser.

An agent or an agent's representative must not accept commission from the seller of real estate when engaged to purchase that real estate on behalf of a purchaser.

A properly licenced buyer's agent cannot and will not accept commissions from the seller if you have engaged and paid for their services. There are heavy penalties leading to the loss of licence if they were found to be receiving fees and commissions from both the seller and buyer in the same transaction.


So, to protect yourself, you should always ensure you engage a paid licenced buyer's agent for the purchase, not any other real estate sales agents helping you for 'free'. The free buyers agent services are not free, they cannot have your interest at heart and that will cost you dearly. If they are not paid by you, they are paid by the seller and that means, they will have to protect the seller's interest, not you.


What do you need to know of people giving you Financial Freedom through Property Investing? Rogue Buyer's Agents?

So, if the law is so clear, what do you need to watch out for? Have you heard of get rich quick, property mentoring programmes?


Yes, those that charges you a sign-up fee to join their financial freedom property investor investment services, gives you access to some online sales materials, then entice you with their mass-market cookie-cutter formula to "help you buy good properties"? If you've been shopping around for real estate, you would have come across them. Is this legal?

  • Are these consultants real estate agents? Or are they the smooth talking salespersons?

  • They have to be legally licenced to sell you properties... Are they licenced? If not, why not?

  • And because they are providing you a financial dream, they need to have the Financial Planning Licence. Are they licenced? If not, why no?

  • Are they charging you a fee for their "mentoring program", and then getting incentives from the developer to sell you a property? Notice how they always seem to buy where they are recommending? Hmmm... Some food for thought.


Conclusion - Where can you find real, independent Buyer's Agents?

What should you do to ensure you have an agent that truly looks after your interest? You can either spend years to learn everything about the real estate industry, by trial and error, or you can pay for a legit, licenced buyer's advocate to help with your purchase. The regulations mandates that the licenced agent must look after the person who pays them. The same regulations also prevents a licenced agent from working for both the buyer and seller for the same transaction. Thus, to ensure you are engaging a legitimate, licenced buyers agent, all you need to do, is to pay for the agents services and avoid those who sells you an investment dream.


I wished there is, but there's no free lunch, unfortunately. There are no such thing as a free buyers agent service. You might not be paying them, but they will cost you hundreds of thousands.


Some food for thoughts. If you are ready to get in touch with a licenced buyer's advocate, get in touch: Here. Let us discuss if our services are right for you.


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