Beverley Kirby threw in the towel after trying to purchase a home in London’s Chelsea neighborhood after twice being rejected by owners refuting on deals to sell to her.
As Kirby was due to solidify an agreement on a 4.5 million- pound ($7 million) house, she was unexpectedly over-bid by a 500,000 pound higher offer. The broken deal ended up costing her 4,000 pounds in fees while leaving her only a few months to depart from her apartment she had already sold.
“I was getting desperate,” said Kirby, “There was madness in the market. People had no ethics at all.”
After the incident, coupled with the increase in prices for a limited number of high end properties for sale, motivated Kirby to hire Robert Bailey, a special kind of broker known as a "buying agent". Bailey is an expert in a field that was unheard of in the U.K. several years ago. He was able to pinpoint a home for Kirby that was not advertised. She made the move in early April after Bailey guided her in carrying out refurbishments and obtaining the necessary consent to use the top of the garage as a roof terrace.
The new wave of brokers are spawning from a flaw in Britain that favors sellers, said Phil Spencer, who hosts property-search shows on U.K. television.
Typically, home buyers in U.K.'s real estate market register with “estate agents,” who present properties to potential buyers but are actually paid by the sellers. As for the U.S., both the home buyer and seller will usually hire brokers, though only the seller is required to pay commission. The costs are then shared by both sets of brokers.
Little Help For The Buyer
“A buyer has nobody to help them with the biggest financial decision of their life,” said Spencer, 40.
The proliferation of advisers charge the home buyer a retainer fee in addition to commissions which can cost up-wards to 2.75 percent of the sale price. Many view it as a cottage industry mostly used by the opulent because it is too costly for most individuals with budgets of less than about 500,000 pounds.
Buying agents are taking over the luxury real estate industry of London as a weakened pound has drawn investors from all over the globe. These specialty realtor services take responsibility for everything from targeting the property and negotiating the cost, to organizing survey and legal work and evaluating the negative aspects of buy such as noisy neighbors.
Buying agents are highly sought after largely for accelerating the home buying process to reduce the chance of being overbid before signing off on the deal.
Such buying specialists are also sought after in many USA markets. More home buyers are turning to buyers agents to help them navigate through the pockets of collapse. Buyers are wary of formerly red hot markets that turned ice cold in recent months. One example is Coral Springs, Florida, an affluent, upper income market of million dollar homes located between Ft. Lauderdale and Miami. In the past year many of Coral Springs best neighborhoods became peppered with foreclosures and short sales, which caused home values to fall by as much as 60%.
Home prices in other states have also fallen and buyers agents are being called on to lead home buyers to areas and homes that are fairly priced and will hold their value for years to come.
One Raleigh real estate agency in North Carolina, one of America's top relocation markets, is in high demand. In fact, this specialty home buying agent is defying the stagnant U.S. housing market.
Ann Davis the top Raleigh relocation agent says her exclusive services are more popular than ever "the call volumes are up, we still have many professionals relocating to Raleigh and the Triangle as the jobs are here. Out of town buyers need relocation help".
Ann Davis and her Raleigh real estate agency For Home Buyers work exclusively for the buyer delivering expertise in many areas large and small. "Our team matches home buyers to their lifestyle needs. We identify homes by price range, location, and also by workplace. Daily commute and travel safety become more important factors for out of town buyers. Raleigh real estate can be intimidating to out of market home buyers not familiar with our highways and surface streets".
Buyers agents also play a key role in home loan origination and documentation. Home buyers are more confident at the closing table when the paperwork has been closely examined by their exclusive buyer agent as home mortgage laws are always changing in North Carolina and across the USA. In addition, with the help of a real estate lawyer, home buyers can ensure the legal complexities are soundly in place.
Buying Agents In Demand
“Over the past five years especially, there has been a quadrupling in the number of buying agents in the prime central London market and their numbers increase all the time,” said Noel de Keyzer, home broker of Savills Plc’s Sloane Street branch.
Although demand is increasing, there are less premium properties available in wealthy London neighborhoods. Purchases of residential properties in the Westminster and Kensington & Chelsea boroughs, where average homes are priced up-wards of 1.3 million pounds, are down 23 percent compared to the average in 1996, according to London Central Portfolio Ltd., which works with luxury rental property investments.
Roughly 100 parcels of real estate valued at the low end of 20 million pounds have been bought since 2006 -- a sector that is less than 10 percent of the luxury real estate market in London. A majority of purchases of that size are now handled by buying agents, de Keyzer said.
The lack of premium houses available spiked prices in central London by 23 percent since a yearlong pitfall, which was caused by the worst recession since World War II, Knight Frank LLP approximates. Real estate values in the United Kingdom as a whole rose about 12 percent, according to the Nationwide Building Society.
Buying agents consult with private financial institutions or wealth managers to drive new leads to sustain the flow new opportunities. Several professionals, many of which were brokers in the past, have established their own practice as international buyers flock to the London market.
“All you have to do is two or three deals a year and you earn as much as you did before,” said Johnny Turnbull, who set off on his own since 2006 after leading the London arm of Prime Purchase, Savills’s buying-agent arm.
Many buying agents who work independently claim rivals owned by brokers invoke a conflict of interest because their organizations represent both the buyer and the seller.
“They’re trying to milk the fees at both ends,” said Francis Long, who established Hanslips 12 years ago, a buying agency covering London and southeast England.
Savills and Knight Frank claim there are “Chinese walls” and enough transparency to avoid problems, and that not many consumers deal with issues during the arrangement.
Buying agents depend upon quality relationships with brokers, real estate developers and owners to place their clients first in line while buying a home. Offering exceptional service is essential to maintain steady business, said Bailey, who helped Madonna purchase a home in Mayfair in 1999.
Agents research and analyze a property and prepare reports that may expose whether a famous neighbor has a noisy entourage or whether planning authorities are weary to poolside floodlighting.
“What worries me is that people don’t deliver and start to give the rest of us a bad name,” said Bailey, who has 25 years experience in the prime London market.
The Luxury Allure
Dell, 32, developed the London-based company in 2007 and has driven his business through continuous visits to potential home buyers in countries ranging from India to Nigeria.
“It helps us to understand them, to see them in their home and their culture,” said Dell, whose clients demand real estate with feng shui compliance.
Competition for luxury real estate within a reasonable commuting distance of London is just as intense. Here buying agents must research even more extensively, said Mark Parkinson, who aided the development of Middleton Advisors LLP in 2008.
The amount of effort put in is not always appreciated.
“You prepare a detailed report -- down to reminding the buyer of an old rectory that the church bells chime every 15 minutes -- and they probably don’t even read it,” said Parkinson
Spencer and Allsopp
Spencer and Allsopp urge home buyers with smaller budgets to utilize the services of home agents, said Jo Eccles, who established Sourcing Property four years ago and has facilitate roughly 70 purchases or rentals in London worth a combined 40 million pounds.
Not all buying agents will thrive, according to Andrew Giller, head of London searches for The Buying Solution. Intense competition coupled with the recession of deals since the latest financial crisis may result in struggles for individual operators.
Spencer’s London-based search company filed for financial insolvency in February 2009 after a deal drought lasting four-months left the company unable to cover the expenses of running the organization. Unfortunately, the company's bankruptcy lawyer could not find the solutions to keep the company afloat.
He’s no longer a part of the business, in some respects due to Garrington Country, an organization established from its former regional arm. Garrington has since expanded in northern England, said Managing Director Jonathan Hopper.
“The market is an emerging one,” Hopper said. “Who you are dealing with is key -- there’s a mixture of very capable, experienced agents out there and then there are those who are just going out to spend other people’s money.”