Why should I use a broker?
One question always asked is whether you should use a broker or try and go direct to developer.
A normal question a client would consider is why to use a ‘broker’ or sourcing agent rather than going direct to developer, after all surely the broker is making a commission that could go to you? Alternatively can you not just use a buy to let broker and then once you have the right property go direct at that stage?
These are legitimate questions, and after all you are in the business to get the best possible returns which means any cost savings should be taken at all stages of the investment. So what exactly does a broker do?
Firstly it is important to understand how the relationship between all the parties work. In the main developers build, lean on brokers with their network of investors to sell, and then the management company manages the building there after.
With this relationship developers either do not have a client focussed sales team, or have agreements with brokers that if a client does come direct they are unable to offer discounts.
This means that if a client does circumvent the broker they pay market rate, however if they buy through the broker there is an ability to negotiate the price.
In addition to this as companies like Baron & Cabot purchase a large volume of properties through the developer via their client relationships, the broker has the knowledge of how far the developer may reduce costs and the volume of business to be in a position to work a deal.
There are further complexities in the role that a broker takes with a development.
Property Underwriting
Before a project is launched, often a development is underwritten by the developer or master agent themselves. What this means is that in exchange for a discount on some, or all of the apartments in a development a company like Baron & Cabot will guarantee that they will purchase any stock which is not sold.
This offers benefits to the developer in that they know all or a large proportion of the properties are ‘sold’ before they even start building or advertising, the broker is able to get exclusive stock to offer to clients, and clients get to buy at a discounted rate.
Due Diligence
One of the primary benefits of working with a broker is the due diligence on a development which any good broker will perform and have the ability to quickly share details with you.
Things like who is funding the development, section 106 and planning details, lease information, reliable price point and expected growth are all the information a good broker will have before ever taking on a project from a developer. While most developments are safe and will make money there are a few (completed and off plan) which are wisely avoided.
Full Market Coverage
One of the great benefits of building a relationship with a broker company and an individual within the company will be getting a full market view, which is not restricted to a developer. Naturally and direct developer will only show you their projects which may or may not be suitable to you as an individual.
Like comparing your life insurance, car insurance or mortgage rate using a good broker will allow you to have a quick view on what is available UK wide and the best price point, or return of investment within your criteria. Along with having your due diligence ready to read this will save you significant time in your search.
None advertised developments/ properties
One thing any investor should bare in mind is that there are always 3-4 developments in the pipeline at any one time that are not ready to be advertised because due diligence has not been finished, or the company will not launch externally as they believe it will all be sold with existing clients.
Speaking to a good broker they will be able to give insight into what may be coming available which would be perfect for you, and allow you to get first opportunity on the best units.
Other Services
Legal services, management companies and currency exchange are some of the additional benefits for you. Like any good working relationship you have the broker will add value and allow your investment to be seamless as possible. Equally advising when you should sell or remortgage is key to helping grow your portfolio.
Like with any partnership there are good and not so good brokers but working with ones which have market coverage and full due diligence on every project is key to getting the best out of your investment.
It is likely just re-assurance that your decision is correct and support in getting the best possible deal but allows you to get the professional support you would expect from a mortgage broker or solicitor. A good broker is not an estate agent showing you all the properties available, but a key partner in delivering the best investment for you.