Show notes – Listener questions – Is it critical for a Buyer’s Advocate to have local expertise and can a “borderless” BA overcome this with data? Should you first know where to invest & then pick a BA that works in the area? How would you know where to invest? And more (Ep.149)

Vendor Advocates

The question
I am interested to know about vendor advocacy. We are selling a property and have been approached by a known buyer’s advocate in our area who has offered to act as our vendor advocate. This isn’t the first time we have sold, it’s our fourth time and our most important. We haven’t been overly happy with our agents in the past and could see the value this person could bring. The thing I can’t reconcile is why an agent would do more for us at the request of our advocate when they are getting less commission (advocate getting their share). We are open to a new experience and after two discussions with the advocate we can see the knowledge base is high. We just don’t know what to be careful of and if we end up paying a higher commission will it be worth it?

What is a vendor advocate and a selling agent
Vendor advocate positions themselves as someone who is capable of running a campaign and overseeing a selling agent, to make sure that they’re following all due process to get the best outcome for the seller. 
Cate does not do vendor advocacy and doesn’t believe in it. When you’ve got the right agent, they want to get the result for you. They want an ongoing relationship, but they also want to do such a good job that their name is in bright lights and good word of mouth.  

Can this vendor advocate add value?
They know the questions to ask, when things are meant to happen, which selling agents have gotten great results. Does a vendor advocate know more about selling agency than a selling agent? Probably no. Perhaps they do spur them on and hold them accountable.
If you haven’t gotten time to interview them or have knowledge of the steps they should be following, then maybe a vendor advocate is for you.
There is a time and a place for vendor advocates. We also provided vendor advocacy service, it was called Sell Smart. You need to be selecting a very competent person in this field.  

Benefits of using a vendor advocate 

1. Review the property to determine if the property should be sold. Auction, private treaty or other 
2. Inspect the property to determine its market value by finding the best comparables, may also be across or able to find sales results not yet released to public. 
3. Determine method of sale and timeframe to achieve the highest price 
4. Interview agents and appoint the preferred agent and negotiate the fee on your behalf. they know who the top agents are and have relationships with them. Advice on what fees you should pay 
5. Develop the advertising campaign and negotiate campaign budget, including advertising methods and schedule 
6. Guide you on how to present the property.  
7. Negotiate the sale – represent you during all sale negotiations 
8. Saves you time – interviewing multiple real estate agents, market research, negotiations. This is their day job and it saves you time. 
9. Provide you with an education through the experience.   
10. Independent advisor – your advocate is 100% focused on you and your property and negotiates in your interests.  
11. Minimise stress 
12. You can be as involved or remote as you like in the process – you don’t have to deal with the real estate agent if you don’t want to. 

Considerations for using a vendor advocate

1. The real estate agent may not work as hard because they’re not getting paid as much. We were fee for service, they paid us a fee so we were not cutting out some of the payment from the real estate agent who we worked with.  
2. Like any provision of service, you need to choose wisely for what’s best for you.  
3. The ones that do it badly can make a mess of things, hard for the purchaser and hard for the agent. The advocate got in the way, tried to justify their existence. I’ve also worked with really great vendor advocates. The thing that stands her apart, she’s worked for a long time as a selling agent. Knows the issues and hands on experience.  
4. Take on a vendors advocate who has never worked in a selling agency, you don’t have the same exposure.  
5. The times where it works really well – elderly people transitioning.  
6. Different magical touch, stakeholders (children), deadline and people who are vulnerable and too trusting.  
7. Someone trying to sell a property that they’re not familiary with – parents home, interstate, a property that you haven’t been hands on with.  
8. If you’re looking for time saving, peace of mind and confidence that they will drag more out of the market place – then that is when they will add value.  
9. I would always be concerned if you’re going to take some of the fee away from the real estate agent – starting with a bad taste in their mouth from day 1.  
10. Ask your vendor advocate how they select the agent – what say do I get, what are you looking for, how many will you interview. You want ot make sure they’re not flinging it to their mate.  

Borderless vs local buyers agents

The question
Hi Cate, Peter and Dave,
How important is it for a BA to have local area expertise?
Can a “borderless” BA, overcome lack of localised knowledge with data / analytics?
Can you trust borderless BAs to recommend different locations to invest and also have them do the buying?
Or should you first know where to invest, and then pick a BA that works in the area?
If it’s the latter, how would you know where to invest in the first place? 

This goes to the heart of our business and one of the key reasons why we removed buyers agents from our service. Being one of the pioneers of having buyers advocacy in house in 2004 to 2011.
If we wanted to provide property plans for people and develop a property plan for people that was location agnostic, I didn’t think we could have buyers agents in house. 
The reality was that we were always going to recommend our buyers agents buy properties for the clients, and we were only focusing on Melbeourne and it’s not always the best city for your next purchase.  

How important is it for a BA to have local area expertise?  

VERY IMPORTANT, we always refer to local buyers agents that have great knowledge in their specialised locations
Borderless purchasing – very familiar with the areas they go into. Some people get on a jet and have google maps running. If the agent doesn’t know me really well, that’s not ideal. We know the agent we’re dealing with, that’s half the battle.
Detail around the pockets that you want to avoid – you need a strong knowledge of the area 

Can a “borderless” BA, overcome lack of localised knowledge with data / analytics? 

Dave – Personally, I don’t beleive so. On the ground knowledge is impossible to replace. Logistically it’s really difficult to do.

Cate – Don’t think you can, I don’t do Bendigo, only been there 50 times, need to be really familiar with an area. Do on the ground leg work, streets to avoid, pockets to avoid. Some places where property managers don’t take the rental. Post code that spans two segments, one that you never want to buy in. You could buy in that dodgy patch. Proximity to shops, cafes and stations is not what drives Ballarats. Powered sheds and secure backyards – if you’ve got that, your tenant may never leave.  

We can all do research on the net. One of the indicators on gentrification is increase in the number of people with bachelor degrees. But the number of people had skyrocketed and Pete lived in the area. The only way you do a masters course is if you do an undergraduate. Median price shot up – this was a new subdivision had gone in, people pay a premium for new properties. Not because existing stock had gone up in value. If you’re a local, you would understand. Local knowledge you need someone with boots on the ground.  

The cost of flying to that state – are you flying, are you staying there. There is extra cost to the person providing the service. How do they still provide the service with those extra overheads? They may be cutting corners.
You can’t do it to the same skill level to someone who is in there day in and day out.  

Can you trust borderless BAs to recommend different locations to invest and also have them do the buying?  

Dave – Personally it is not my preference. I wouldn’t use them myself, and never recommend to our own clients to someone who is not locally based and on the ground. That is one of the pre-requisites when we have a client strategy for their next purchase that is best suited to a city they don’t live in, we only refer our clients to a local buyers agent.

Or should you first know where to invest, and then pick a BA that works in the area?  

Yes, 100 per cent. That is how our Property Plan process work. The plan should come first, followed by the strategy for your next purchase, followed by the property selection and therefore selection of the buyers agent. Sadly for most people, they skip having a plan and ensuring the strategy for the next purchase fits within their Plan.
Being prepared to consider what fits your strategy, taking into account all of the metrics. Not everyone knows where to look – purchase price, outgoings, yield, capital growth, vacancy rates – this comes down to strategy.
If you’re going into an area on a speculative basis, that’s property trading and that’s not what we talk about on this show.  

If it’s the latter, how would you know where to invest in the first place? 

If you have a plan, then the strategy for your next purchase is much clearer.

Some of the key factors that determine what we call the macro location which essentially refers to the city include the following, often in this decision making sequence which we include in our Property Planning process –

1. Will it be a lifestyle or investment purchase
2. Will you sell any of your existing properties
3. What is your budget as it needs to align broadly with the median of the macro location (city) or the micro location (suburb) – cash flow, available funds and equity. That can cross out some cities or include some cities.
4. Where do you own existing properties to factor considerations such as diversification, market cycle risk and do you own assets in in some of Australia’s strongest long term markets
5. What kinds of existing properties do you own
6. What is your rental income goal for retirement, how gross rent do you already receive, and how many more properties will you purchase/how much more rent do you need to hit your goal factoring in your timeline to retirement.

From working through the above, we are usually able to provide one to three (sometime more) macro location considerations with commentary around the pros and cons of each.

Certainly the budget is a critical piece of the puzzle.

Once the above is determined, we are also able to consider the type of asset that we are able to target in the city and micro locations/suburbs based on pre-existing sales which ultimately should enable an informed decision to be made which also enables us to align the price point to suburbs.

Mindful that there is no perfect answer as we don’t know what the future holds, but this provides a structure and methodology behind the process and empowers the client to make an informed decision with our guidance.

You won’t know the specifics to the same detail as a local buyers agent, so at this point we would refer them to a local buyers agent to go the last mile with them so to speak with there specific knowledge OR they support them on there own journey but this is much more difficult when it is interstate and not ideal.

Real estate licences are state based – some exams and applications, recognition for prior learning.
Your agent needs to have a licence in that state.
Every state has different legislation – forms, contracts, vendor statements. There is such a degree of art and science in understanding the legislation and how it works.
Can they be experts upon multiple states?