I recently came across a useful summary on why you might consider using a buyer’s agent in a residential context.
The summary explained that while most home sales in New Zealand involve just one real estate agent – the listing agent who is working for and is paid by the seller – a buyer’s agent can help with searching, assessing properties and negotiating the sale on the buyer’s behalf. It noted that many people would be familiar with the role of buyers’ agents if they’d watched the UK television programme, Location, Location, Location, where Kirstie Allsopp and Phil Spencer help buyers in all aspects of the home-buying process as they search for their ideal home. Great show!
It went on to explain that a buyer’s agent is a licensed real estate agent who works for and is paid by the buyer — agents cannot claim a commission from both the buyer and seller in the same transaction and in New Zealand, for a residential transaction, a buyer will typically pay around 3% of the value of the home they buy to the buyer’s agent. This fee is not related to the commission the seller pays to their listing agent.
Commercial Context
The use of buyers agent’s is not restricted to residential property, with a number of clients using parties like TwentyTwo (as a licensed real estate agency) to lead the purchase of land or existing buildings or the purchase of a new development to be constructed on their behalf. On some occasions, the identity of the purchaser is made known. In other cases this is kept confidential, to obtain strategic and commercial leverage or particularly if the transaction is subject to approvals or unwanted publicity.
Advantages
The www.settled.govt.nz article sets out the reasons someone may choose to engage a buyer’s agent. These include, in a commercial property context:
- The purchaser has limited time or resourcing available or often they have limited in-house experience leading a large transaction
- The purchaser has limited market or local knowledge and while they have identified a need for the “property” they are reliant on the buyer’s agent to undertake appropriate due diligence, engage other professional advice as needed (such as valuation or building condition assessments) and work with the purchases legal advisers on how to best structure the offer, Sale & Purchase Agreement and settlement terms
- This role extends to the buyer’s agent, making sure other relevant properties have been considered (not just the one listed) and alternative viable options are considered in the event the preferred property becomes unavailable or uneconomic to purchase
- The purchaser drawing on the negotiation skills and experience of the buyer’s agent who can advocate on behalf of their client and provide objective and independent advice
TwentyTwo Experience
We undertake a number of formal market searches (using RFP-type processes), confidential off-market searches for clients who have specific requirements or act as a buyer’s agent when the client has already identified a preferred option. Some relevant examples include:
- FMCG: Led market search using RFP process to identify potential sites and development partners for new distribution centre, led shortlisting, due diligence and commercial negotiations alongside client and legal advisers, including Development Agreement and S&P Agreement, to purchase completed new development on practical completion
- Confidential: Acted for a client seeking to acquire a site for development in a market where there is a paucity of land options available and previous attempts to identify and secure a site had failed. TwentyTwo led fresh off-market search, initial enquiries and due diligence, worked with client and legal advisers to negotiate S&P Agreement terms and conditions
- Education: Led off-market search, due diligence and negotiation to purchase land for the development of a new faculty
- Confidential: Led due diligence, negotiations for purchase and subsequent on-sell/divestment for strategic landholding, resulting in significant arbitrage opportunity for client
- Education: Led initial due diligence and engagement with listing agent for potential conversion of existing office building for sale for potential alternative use
Independent Advice
If you are thinking about purchasing a commercial property (whether office, retail, industrial or specialist) don’t rely only on the listing agent. While they have a responsibility to ensure both the vendor and purchaser are fairly treated, under their responsibilities of the Real Estate Agents Act 2008, the listing agent is ultimately working for and is paid by the seller.
If you want to have confidence in the decisions you are making, think about appointing a buyer’s agent.
