Building Your Real Estate Power Team
Bud Streten JP (Qual)
Indigenous Entrepreneur, Partner and Father - Throwing the play book out the window
When you are finally ready to make your start in the real estate world it is extremely helpful to build your power team. When utilising professionals and having them advise you, you’re turning your zero experience into years of combined knowledge of thousands of property transactions. Let that sink in for a moment.
When assembling a power team there are five main professionals (But not restricted to) you should include, they are
1. Buyer’s Agent
2. Lending Manager
3. Conveyancer
4. Accountant
5. Building and Pest Inspector
Buyer's Agent
With all the self-help websites and YouTube videos, you may be asking yourself, "are real estate agents still worth it or are they a bygone service?" By representing yourself in buying or selling, you will save yourself the commission fee, which can be a decent chunk of change; however, do you understand the work that a good agent does to earn that commission and what information that have access to and reach in local areas? If you decide to go at it yourself without the help, you may end up spending or lose out on more than the agent's commission. Buying or selling a home is an emotional rollercoaster and a major financial one at that. Let's talk about why you should consider an agent.
A primary role of a real estate agent is to represent you as a client and liaise with other buyers, sellers and agents, meaning that they will usually have access to a range of properties listed by other agents. While achieving your goals and strategies, a buyer's agent understands how to bring a deal together. A good buyer's agent would sit down with you and determine what you are trying to achieve by buying a property. In most cases, people do not fully understand what they want or why they are doing it, with the typical answers being "Because I want to own my own home" or "I am sick of renting". When the people answer, "Because I want to utilise real estate to grow my wealth", they still wouldn't understand what that meant. Whilst there are many strategies whilst investing in real estate, I only reference the two main types that most people fall into, they are,
1. Capital Growth
Properties with higher capital growth are usually houses and are in the more desirable areas; they will often not have a high rental yield.
2. Yield
Properties with high rental yields are typically apartments or townhouses, and their capital growth is usually a lot slower.
The process of a buyer's agent covers many areas; let's look at these parts below.
Strategy
A buyer's agent will meet with you and have a conversation about what you are trying to achieve and look at your overall picture to help you decide which of these strategies best works for you.
Legal
The buyer's agent will discuss their fees and what level of service you need and then walk you through the contract; here in Queensland, it is called a Form 6. You can utilise a buyer's agent to provide a full search to settlement service or do as little as representing you bidding at an auction. Most buyer's agents will charge a percentage of the home's purchase price as their commission, which could be 2.2%. Making up part of this overall commission will be an engagement fee which varies from $1,100.00 to $3,300.00 and is there to cover the agent's upfront costs whilst they start their service. This engagement fee will make more sense as we go through the process. Once you have agreed on the service terms and conditions, signing the contract will allow the agent to act on your behalf to find you a property.
Finance
When utilising the complete services of some buyer's agents, they can even accompany you to your pre-approval bank appointments, so you don't feel intimidated by the lender's process and get acquainted with your lender, which comes in handy later in the process. It is a good idea for your buyer's agent to have that good relationship with your lender as it makes the process a lot smoother and less stressful when everyone is n the same page. At this stage, your buyer's agent will get to understand what they have to work with as a budget for finding you your new property and what restrictions the lender may have. An example of this may be that the lender does not like to purchase at auctions. Another critical piece of information your buyer's agent will acquire from your lender is the desired timeframe they can work with as your finance clause on the contract of sale. Most lenders require their clients to have a 14 to 21 Day finance clause on the contract of sale. I have an excellent relationship with my lending managers allowing me to undercut competitors' contracts by only having a 7-day finance clause, giving my clients the edge with the selling agent.
The Search
When searching for properties, a buyer's agent will utilise multiple software programs that alert them when properties become available that match your requirements. They then conduct all the background research on the properties, with many applying over 50 layers to each property to shortlist them. A few of these layers are things like
? Easements
? Bush Fire threats
? Floods
? Nearby Development Applications
? Schools
? Public Transport
? Development potential
? Council overlays
? Traffic density and flow
? Suburb growth forecasts
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Depending on your location, you can expect your buyer's agent to process around 50 properties to narrow it down to two or three to present and arrange inspections. How long would it take you to search, ring selling agents and cross-reference 50 properties with things you may not even have access to? The engagement fee we mentioned earlier starts to come into clarity as it takes a tremendous amount of person-hours and resources to even get to this point. If you decide not to buy a property, the agent hasn't wasted their time and resources.
Inspection
When the list has been narrowed down to just a few properties and presented to you, you and your agent will attend the property and assess its suitability for you and your family. For the property to get to this stage, it already suits your strategy and criteria, but you still need to feel comfortable and like it. I will cover property inspections in more detail in another article.
Negotiations
One of the benefits of having an agent is their negotiating abilities; they do this many times a year compared to the average person who only buys a house twice or three times in their lifetime. Making offers and negotiating contracts can cost you immensely if you do not know what you are doing. A buyer's agent will work with your lender and conveyancer to represent you, ensuring your best interest is in all conditions and prices.
Contract conditions
When drawing up the contract of sale with the selling agent, there will be conditions that your agent would have included. I cover the contract and conditions further in another article; however, in this phase, your buyer's agent will ensure that everyone needed to satisfy these conditions is organised and carried out.
Lending Manager
Having your lending manager as part of your power team enables you and move more efficiently when making informed decisions. You know exactly where you stand and what your borrowing capacity is. As discussed earlier, creating that rapport with your lending manager can differ between a 21-day and a 7-day finance clause and how smoothly your application will process. The length of your financial clause is a crucial point to consider when there are multiple offers on a property with the same finance conditions where the others have only access to 14 or 21-day finance. I cover mortgages, loans and pre-approvals in another article about real estate finance.
Conveyancer
Conveyancing is the process of transferring ownership of a land's legal title to the new owner; this can be a person or entity.
I highly advise against attempting to do this on your own, as the sheer complexity of the legal work involved is mind-boggling. The attention to detail required to ensure nothing is left out or overlooked is crucial, and I do not envy a conveyancer's position.
There is a lot of work involved in transferring a title and ownership of a property, and it generally consists of three stages.
1. Pre-contract
2. Pre-completion
3. Post-completion
A significant part of the conveyancer's role is protecting your interest in the property's contract of sale. A conveyancer also ensures that all parties know the conditions and dates required to be met or satisfied. These dates are known as the "critical dates" and help you prepare for these dates as part of their role. They are in regular contact with the other party's conveyancer dealing with all the issues that pop up and need addressing. If you fill the forms out yourself and make a mistake, you could lose the contract and lose your deposit. If you engage a conveyancer and then they make a mistake, at least they have professional indemnity you can claim.
What is a conveyancer?
A conveyancer is a licensed professional who provides information and advice about a property sale. Conveyancers don't have to be solicitors; many are and undertake property law. I always strongly recommend you engage a conveyancer when you are;
? selling or buying a property
? updating a title
? conducting a subdivision
? changing, removing or registering an easement
Financial Advisor
Financial advisors are a crucial part of your team for many reasons, both before buying a property and after.
Before purchasing a property, a financial advisor can help you strategise to save for your deposit and a possible comfortable loan amount. When utilising online home loan calculators, they work out the maximum you could borrow and often do not consider your other life goals, such as planning to start a family.
After purchasing your property and the loan repayments commence, a financial advisor can help you develop ways to leverage or maximise your financial position. Maybe you want to go out and buy a new car but after running that idea past your advisor, realise that if you wait twelve months, you will be in a far better place to ride out any hardships you may encounter, such as time off due to a global pandemic.
Bullets from Bud
? Physically meet with your lending manager to engage that connection
? The right Buyer’s Agent will more than pay for themselves
? Ask around about conveyancers, especially from your agent and lending manager
? Ensure that your Financial Advisor is aligned with your goals