Free Buyer’s Agent for New Homes: Who Actually Pays Them?
If you are researching a new apartment, townhouse or house-and-land package, you may come across an attractive offer:
“Use our buyer’s advocate—it costs you nothing.”
That sounds like an easy decision.
Why pay for professional advice when the same help appears to be available free?
New-property sales operate differently from much of the established-property market.
Builders and developers often have marketing and distribution budgets built into a project cost.
That can include payments to:
project marketers
sales agencies
referral businesses
property advisers
buyer-introduction services
developer-funded buyer representatives
So while the buyer may pay $0 directly, the adviser is still being remunerated when the transaction proceeds. This is how the free buyers agents are being compensated. By the sales they make. So, they are really sales agents, more than a true-blue buyers agent.
That does not automatically make the advice poor. But it does mean you should understand who is paying and what stock these "free buyers agents" can genuinely recommend.
Why do developers pay buyer-introduction commissions?
Developers need buyers.
Just as an established homeowner might pay a selling agent to market a property, developers may use outside sales channels to bring buyers into a project. So, when an agent introduces a buyer who purchases, the developer may pay that adviser a commission.
From the developer’s perspective, that can simply be part of the cost of selling the project.
For the buyer, however, it raises an important question:
Is the FREE buyers agent searching the whole market for me, or selecting from properties that pay them well?
Those are not necessarily the same service.
Who does the property adviser legally represent?
This is one of the most important questions a new-home buyer should ask.
Under Regulation 11 of the Estate Agents (Professional Conduct) Regulations 2018 (Vic), an estate agent must act in the best interests of their principal, subject to limited exceptions. Those Regulations are made under the Estate Agents Act 1980 (Vic).
Regulation 5 defines the principal as the person who engages the estate agent to act on their behalf.
So if someone is presented to you as a “free buyer’s agent”, “buyer’s advocate”, “property adviser” or “new-home adviser”, don’t just ask whether the service costs you anything.
Ask:
Who has actually engaged you to act?
Then ask:
Am I your principal, or is another party?
And:
Are you acting under a buyer’s agency authority for me?
Those questions matter because who funds the service and who the agent legally represents are related issues, but they are not necessarily identical.
A developer may pay a commission to someone involved in introducing the buyer. Although the quantum (amount) of commission paid is often adjusted to influence the recommendation of the product, it does not automatically tell you who that person legally represents.
The safest approach is to establish both:
Who pays them?
and
Who have they been engaged to act for?
Consumer Affairs Victoria also states that an estate agent cannot act as a buyer’s agent for the purchaser and as the seller’s agent in the same transaction.
That is why buyers should understand whether they are dealing with:
a genuine buyer’s agent acting under authority for them
a developer or project marketer
a sales agent
a referral intermediary
or an adviser operating under another commercial arrangement
The label on the website matters much less than the legal relationship.
Victorian law: whose interests must the agent protect?
Regulation 11 of the Estate Agents (Professional Conduct) Regulations 2018 (Vic) requires estate agents to act in their principal’s best interests. Regulation 5 defines the principal as the person who engages the agent to act on their behalf, while Regulation 12 deals with potential conflicts of interest. The Regulations are made under section 99 of the Estate Agents Act 1980 (Vic).
Victorian professional conduct rules don’t just require agents to act in their principal’s best interests; they also prohibit an agent from accepting an engagement where the agent’s own interests would conflict with the principal’s.
So, now you have it. When dealing with the "Free" Buyers Agent, who are these agents working for?
Does “no cost to the buyer” mean the advice is independent?
Not automatically. Consider this scenario.
The free new-home buyers agent has access to 12 developments. All 12 pay a referral commission. There may be another 30 projects nearby that do not have a commercial relationship with the agent.
But they probably do not need to provide any attractive sales commission, because they are better properties, in better locations, etc. Or they might be cheaper, and thus pay a much lower commission to the free advisors. Will your free buyers agent recommend these projects too?
What about:
an established property?
a different builder?
a house-and-land estate outside the adviser’s network?
delaying the purchase?
simply buying nothing?
Before accepting the advice, understand the dynamics of how sales commissions can influence the recommendation you receive. Is the free buyers agent really working for free? Or is it going to cost you more?
A new property only gets to be new once. Eventually it has to compete as an established property.
One of the easiest mistakes investors make is assessing a new property only on how attractive it looks at the time of purchase. Favourable tax incentives on new homes may attract you to new properties. But this can be misleading.
Brand-new investment properties can provide tax benefits associated with depreciation of eligible new assets and capital works. However, when that property is eventually sold, the next investor may not receive exactly the same depreciation benefits.
Since changes introduced in 2017, investors who purchase existing residential rental property generally cannot claim depreciation deductions on certain second-hand depreciating assets already installed in the property.
So, while the first buyer may be evaluating:
a brand-new property + new-property depreciation benefits
the eventual resale buyer is evaluating:
an established property competing against every other established property nearby.
This understand is important, because the next buyer of your new home will care about:
What is the location like?
Is the floorplan good?
Is there too much competing supply?
Is the building well maintained?
Are the owners corporation fees reasonable?
Is there scarcity?
Would an owner-occupier actually want to live here?
The property therefore has to make sense without relying on its newness (tax benefit).
A useful test is:
If this property were five years old today, would I still want to buy it at this price?
If the answer is no, being new may be masking a weak investment.
Be especially careful. The commission is highest on the hardest stock to sell.
Not every dwelling within a development is equally desirable. Developers may have apartments or townhouses or properties in lesser locations that are harder to sell because of:
poor orientation
lower natural light
awkward floorplans
inferior views
proximity to major roads or services
excessive owners corporation costs
poor parking
oversupply of similar stock
weaker resale characteristics
Commissions can and do vary between projects and individual properties. This creates a conflict-of-interest problem. If the free adviser earns more from recommending one particular project or dwelling, the buyer needs to understand that, especially when the larger commission means the property is harder to sell and lesser in demand.
Again, a higher commission does not automatically mean the property is poor quality. But it should prompt the buyer to ask:
Why is this particular property being promoted?
Would you recommend it if the commission were lower?
Would you recommend another development that paid you nothing?
Is this one of the developer’s easiest properties to sell, or one they particularly need help moving?
Those questions become even more important for investors because the resale market will not care about the original sales incentives.
When you sell in five or ten years, your buyer will simply compare your property against everything else available.
If you bought compromised stock because the original sales channel was heavily incentivised to move it, you may end up paying for that decision at resale.
That cost can easily outweigh whatever tax or purchase incentive originally made the property attractive.
The most important question: can they recommend something that pays them nothing?
Ask them:
If the best property for me is one where you receive no commission, will you still recommend it?
The answer and how it is answered will tell you a lot about the motive.
You should also ask:
Do you receive the same commission from every builder and developer?
If not, ask whether the amount is disclosed.
Are developer commissions built into the property price?
Developers will often say that the buyer pays the same price whether they purchase directly or through a referring adviser. That may be true in the sense that the headline purchase price does not change.
But it does not answer the more important question: who ultimately funds the commission?
In many new developments, referral and sales commissions are paid from the developer’s marketing and sales budget. Those costs form part of the overall economics of the project and are ultimately recovered through property sales.
This can matter even more when the buyer is purchasing with a mortgage.
For example, if a $30,000 developer commission is effectively built into the purchase price and financed over a typical 30-year mortgage at 6.5% interest rates, that extra $30,000 would cost about $68,000 in total repayments, including roughly $38,000 hidden in the mortgage interest, if the loan were held for the full term.
Suddenly, that free advisor is costing you $68,000 over the 30 year loan. Now, compare this to a typical $15,000 fee you pay for a proper buyers advocate.
So while the buyer may be told:
“You don’t pay the adviser anything.”
the economic reality may be very different.
The commission may simply be buried inside the transaction rather than appearing as a separate invoice — and if that cost is financed, the buyer may continue paying for it, plus interest, for many years.
That is why the relevant question is not simply:
“Did I pay anything directly to the adviser?”
It is also:
“Was the adviser’s commission ultimately funded through the price of the property?”
And, just as importantly:
“Did the person recommending this property have a financial reason to prefer it over another property?”
Those are very different questions — and buyers deserve clear answers to both.
What if the highest commission is attached to the hardest property to sell?
Not every property within a development is equally desirable. One apartment may have excellent orientation, natural light and views. Another may face a wall, sit above the car-park entrance or have an awkward floorplan.
Likewise, not every project necessarily offers the same commercial incentives to referral partners.
That creates a question every buyer should be willing to ask:
Does your remuneration change depending on which property or development I buy?
A higher commission does not prove that a property is inferior. Nor does it prove that an adviser will recommend it improperly.
But where remuneration varies, there is a potential financial incentive that the buyer should understand. And this matters particularly with new property because sales incentives disappear after settlement.
When you sell five or ten years later, the next buyer will not care:
what commission the developer paid
what launch incentive you received
whether you had VIP access
whether it was marketed as an exclusive pre-release
or how impressive the display suite looked.
They will compare your now-established property against every alternative available.
They will judge:
location • floorplan • natural light • land component • construction quality • owners corporation costs • competing supply • rental appeal • scarcity • resale desirability
That is when compromised stock can become expensive.
A tax deduction, developer incentive or sales commission cannot fix poor property fundamentals. Eventually every property has to stand on its own when the next buyer decides what it is worth.
Free advice can still be useful
It is important not to overstate the issue. Developer-funded advisers can sometimes provide genuinely useful assistance.
They may:
understand a project better
explain available floorplans
compare inclusions
help with paperwork
explain construction milestones
coordinate with the sales team
help the buyer navigate settlement
For a buyer who has already independently decided to purchase within that particular project, this assistance may be valuable.
The distinction is whether the buyer believes the adviser is providing whole-of-market independent acquisition advice. Or is the adviser making the recommendations only because he is paid more commission.
What should a new-home buyer ask?
Before relying on a “free” adviser, ask:
Who pays you?
Developer? Builder? Project marketer? Sales agency?
Are you acting for me, the developer, the builder, or another intermediary?
This question may sound confrontational, but it is critical for you to understand who these agents are really working for. You need this to establish how trustworthy their recommendations are.
How much commission do you receive?
You may not always be entitled to every commercial detail, but transparency is useful.
Does every project pay the same amount of commission?
If not, understand the differences.
How many developments can you recommend?
Five? Fifty? The entire market?
Can you recommend a builder outside your "preferred" panel?
This is particularly important with house-and-land packages.
Can you recommend an established home instead?
If the adviser sells only new property, the answer will usually be no, not because they cannot, but because they receive ZERO commission.
What happens if the best decision is to wait?
Does the free buyers agent still earn anything? The answer will be no. These free buyers agent won't be paid if you do not buy. So, you know you will always be pushed to buy something through them. They are effectively incentivised to sell, which makes them effectively, a sales agent.
Have you rejected projects?
Ask which developments or builders they have chosen not to recommend and why. This is often more informative than hearing which ones they sell. This question may be superficial, but listen to what's not spoken. What they said, and how they said it will give you an idea of how reliable their recommendations are.
New property needs different due diligence
A shiny display suite tells you very little about the long-term quality of an investment.
Before buying new property, assess things such as:
builder history
developer history
planning context
competing future supply
owner-occupier appeal
design quality
floorplan efficiency
orientation
natural light
storage
parking
owners-corporation costs
rental competition
comparable established sales
price premium for buying new
likely resale market
construction specification
sunset clauses
settlement risk
valuation risk
Compare new property against established alternatives
One of the strongest tests of any new-home purchase is:
What else could I buy for the same money?
Suppose a new townhouse is $950,000. Compare it with:
established townhouses nearby
houses in neighbouring suburbs
recently completed stock
comparable land values
resale townhouses
alternative estates
If the new property commands a substantial premium, determine what you are actually receiving in return. New does not automatically mean better investment.
Likewise, established does not automatically mean better. The numbers need to justify the decision.
Beware of the phrase “off-market”
New developments are sometimes promoted as:
exclusive
pre-release
VIP access
off-market
Those terms can sound like the buyer is getting privileged access to a bargain.
Sometimes early access can genuinely be useful.
But early does not necessarily mean cheap.
Ask:
- What were comparable land/property sales?
- What price will later stages release at?
- Is the developer offering incentives?
- How many similar dwellings will ultimately exist?
- What price have comparable completed properties resold for?
Access is not the same as value.
Should you ever use a free new-home adviser?
Yes—potentially.
The important thing is to understand exactly what service you are receiving.
If you already want a specific project and simply want assistance navigating that purchase, a developer-funded adviser may be perfectly suitable.
If you want someone to answer:
Should I buy this new home at all?
that is a different service.
Genuine independent whole-of-market buyer advocates requires the adviser to have the freedom to compare alternatives and recommend:
this project
another project
an established property
or
nothing at all.
How New-Homes.au approaches new-property buying
New-Homes.au is designed around a different question:
Does this new property actually make sense for the buyer?
That means looking beyond the brochure.
We believe buyers should consider:
the builder
developer
suburb
competing supply
comparable sales
price premium
design
resale prospects
construction risk
contractual considerations
alternative properties
A beautiful new home can still be a poor purchase.
Likewise, a development being heavily promoted does not necessarily make it unsuitable.
The job is to separate marketing from evidence.
The bottom line
A free buyer’s agent for a new development may genuinely cost you nothing directly.
But that should lead to a second question:
Who pays them?
Then ask:
What can they recommend?
What properties can't they recommend?
Does their commission vary?
Can they recommend a competing project?
Can they recommend an established property?
Can they recommend that I buy nothing?
You do not need to assume a commission creates bad advice, but you simply need to understand the incentive before relying on the recommendation. When buying a new home, transparency about who is selling and who is advising matters almost as much as the property itself.
A tax deduction, developer incentive or attractive commission structure cannot fix poor property fundamentals. Eventually every property has to stand on its own when the next buyer decides what it is worth.
Frequently Asked Questions (FAQ)
Why are some new-home buyer’s agents free?
They may be paid a commission by a developer, builder or project marketer when a buyer completes a purchase.
If the developer pays the adviser, does that mean the adviser works for the developer?
Not automatically. Under Victorian professional conduct rules, the key question is who has engaged the estate agent as their principal. Buyers should therefore establish both who pays the adviser and who the adviser is legally acting for.
Does using a free buyer’s agent make the property more expensive?
Not necessarily. Although we know commissions are built into the price of the new homes, the advertised property price may be the same regardless of the referral. The more important question is whether the payment affects which properties the adviser can recommend.
Are developer-paid buyer’s agents independent?
That depends on the model. Ask whether they can recommend properties outside their developer network and whether they can recommend opportunities that pay them no commission.
How can a "Free Buyer Agent" cost you?
Commissions paid to these free advisors are often built into the price of the new homes. If you were to buy with a home loan, you will be effective paying interest on these commission. So, a typical $30,000 commission paid by the developer, will cost you $68,000 in mortgage repayments, at a rate of 6.5% over the typical 30 year mortgage.
What should I ask a free new-home adviser?
Ask who pays them, whether commissions vary, how many projects they can recommend, whether they can recommend established property and whether they can advise you not to buy.
Are off-the-plan properties bad investments?
Not inherently. Their suitability depends on price, supply, location, developer/build quality, design, rental demand, resale appeal and competing alternatives.
Should I compare a new property with established homes?
Absolutely. Comparing established sales helps determine whether you are paying a reasonable premium for new construction. You might be surprised that some established homes offer better value, better growth in the longer term. But you need to be able to afford it. This article on established vs new-homes may surprise you.
Comments