Engagement fees and retainers: what you pay before the search starts

The first invoice on a buyer's-agency campaign often arrives before anyone has stood on a verandah. Firms call it an engagement fee, a retainer, an appointment fee, a commencement fee. The label changes. The cash-flow fact does not: you are paying before the search is real, and you need to know whether that payment is a deposit on the eventual success fee or a separate cost of being taken seriously.

This is ordinary. REBAA's description of a full-service industry average includes an engagement fee alongside either a 2 to 3 per cent success fee plus GST, or a flat fee plus GST. Public consumer sites, for their part, keep repeating that the whole arrangement is negotiable and is not set by law. There is no official week-one charge you have failed to learn. There is only the clause in the authority you are about to sign.

This page stays with that week-one money. For the wider landscape see how much a buyer's agent costs. For the document that makes the invoice lawful, see buyer's agency authority explained. Both live in our fees section.

The invoice that arrives before the first inspection

Buyers are used to paying inspectors and conveyancers after a house has been chosen. Paying a buyer's agent before a house exists in the file feels backwards until you look at the hours. A serious brief takes time: walking the last quarter of sales, calling listing agents, discarding the suburbs that will not work, booking the first inspections. Firms that start that work on a handshake then chase a success fee for months are taking a credit risk. Firms that ask for money now are asking you to share it.

That explanation can be true and still be incomplete. An engagement fee also filters tyre-kickers. It also funds the first week whether or not you later buy. It also, in a less attractive shop, tests how little paperwork you will accept before you transfer. The same dollar figure can be all four of those things. Your job is to find out which ones apply.

If you do not yet know whether you want a full search or a day's negotiation, do not pay a full-search retainer to "get things moving." Scope first. What a buyer's agent does is the piece that separates those products. Money second.

Retainer, engagement fee, deposit: three words, three jobs

In this trade the words leak into each other. A retainer in a solicitor's office is often money held and drawn against. A deposit in a contract of sale is money that sits toward the purchase. An engagement fee in a buyer's-agency authority is often simply an invoice: paid, banked, and later credited — or not — against the success fee.

Do not import the other meanings. Ask what happens to the dollars. Are they held in a trust account or paid as a fee earned on signing? Are they credited, dollar for dollar, against the success fee if you complete? Are they credited only if you complete on a property they introduced? Are they refundable in any circumstance that is not the firm's breach?

The answers belong in the authority, not in the meeting notes you will lose. If the firm says "we always credit it, don't worry," write the credit into the fee schedule and stop worrying because it is on the page.

Why firms ask for money up front

The charitable version is capacity. A small practice cannot run three unpaid searches and a month of auctions on the hope that one of them settles. The engagement fee buys a place in the diary and a reason to turn down the next enquiry that would have collided with yours.

The less charitable version is leverage. Once money has left your account, you are a little more likely to stay, a little more likely to soften a brief that is not working, and a little less likely to walk into the next firm's office. That is not automatically improper. It is a reason to keep the amount proportionate to the work that will happen before anyone needs a success fee.

Proportionality is local. A retainer that looks modest beside a Sydney campaign can look heavy beside a short negotiation on a unit you have already chosen. A retainer that looks light beside a six-month investor search can still be the wrong shape if it is non-refundable and the brief is half-formed. There is no official ratio. There is only whether you can explain the figure to yourself without using the word "standard."

The credit against the success fee

The cleanest arrangement in common use is also the one REBAA-shaped commentary assumes you will meet: you pay an engagement fee now, and if you later pay a success fee — percentage or flat — the earlier amount is credited so you are not charged twice for the same campaign.

"Credited" needs a definition. Is it credited including GST, or do you discover that tax was handled twice? Is it credited automatically on the final invoice, or only if you remember to ask? Is it credited if you buy in week two, before much search work has happened, or does a minimum success fee sit under the credit and swallow it?

Work a sample. Suppose the GST-inclusive success fee would be $28,000 on the house in the middle of your brief, and the engagement fee was $4,400 including GST. If the credit is real, the last invoice is $23,600 and the $4,400 was cash flow. If the credit is not real, you have paid $32,400 for the same job. Those figures are arithmetic on a made-up quote, not a schedule. Do the same sum on the real letter.

The credit is also why you should not add the engagement fee to the success fee in every dinner-party version of "what they cost." Sometimes it is extra. Sometimes it is an instalment. The authority decides which dinner-party version is true.

Refundable, credited, or gone

These are three different destinies for the same transfer.

Refundable means the money can come back if a listed event happens: you terminate within a short cooling period on the authority, the firm cannot take the brief, a licence problem appears, or — more rarely — you simply do not buy. Refundable retainers exist. They are not the default in the conversations readers send us.

Credited means the money stays with the firm and later reduces the success fee. That is useful only in the ending where you buy through them. In the other endings it behaves like a non-refundable fee that happened to have a polite name.

Gone means the money is earned on receipt, or earned once work starts, and does not return and does not reduce anything else because nothing else will be invoiced. This is the ending you need to stare at if you are the sort of buyer who might pause the campaign when a job is posted interstate or a relationship changes.

Ask the three questions in the retainer's own language. If you do not buy, is any of it returned? If you buy a property they never introduced, does the credit still apply or does a second fee appear? If you terminate, is the retainer kept as liquidated damages, kept as a fee earned, or apportioned to work already done? NSW Fair Trading, Consumer Affairs Victoria and WA Consumer Protection cannot answer those questions for a private contract, but they do tell you to use a written authority and to ask about rebates. Put the retainer answers on that same piece of paper.

What the upfront payment should buy

Money now should buy work now. A written brief that pushes back. A first pass at comparable sales. A suburb list that has already lost the postcodes your budget cannot touch. A plan for the first fortnight of inspections. Names of the inspector and conveyancer they would use, and a written note on whether those people pay the agent anything.

If the first three weeks after payment produce only a branded folder and a login to a portal you already use, you did not buy a search. You bought stationery. That is one of the patterns we flag in red flags when hiring a buyer's agent and across the checks hub.

Ask what they will not start until the fee clears. Some firms will not contact selling agents. Some will not inspect. Some will not even write the brief. Those boundaries can be reasonable. They should be spoken before the transfer, not after you have asked, mildly, why nobody has called you back.

GST on money you pay in week one

Australian Consumer Law's single-price rule does not wait for settlement. If you are being quoted an engagement fee as a consumer, the figure should include GST. "Three thousand plus GST" is an unfinished sentence. The authority and the tax invoice should show the inclusive amount.

Credits make this fiddly. If the engagement fee included GST and the success fee includes GST, the credit should not create a surprise tax adjustment that only a bookkeeper can love. Ask them to show you a sample final invoice: engagement fee paid, success fee due, credit applied, GST treated once. If they cannot sketch that on a page, they have not finished designing their own product.

Keep the tax invoice. If the campaign dies and the fee is gone, it is still a professional service you paid for. Your accountant can decide what that means. Your future self will be grateful the paperwork exists.

The three questions, asked about the retainer

The same three questions that sort a success fee also sort a retainer. They just need to be asked twice.

What happens if you do not buy? On the retainer, this is usually the whole story. There may be no success fee to argue about. There is only the money already gone, plus extra disbursements if any were authorised.

What happens if you buy without them? This is where exclusive authorities and retainers combine. You may have lost the engagement fee and still owe a success fee on a house they never walked. Or you may have lost the engagement fee and owe nothing else because the success trigger is tied to introductions. Those are different lives. Read the clause.

What happens if you terminate? Notice periods, leftover hours, and the occasional attempt to treat termination as a trigger for the full success fee all live here. A retainer that looked like a polite deposit becomes the least of it.

Ask them in the interview you run using how to choose a buyer's agent. Then confirm the answers against the licence — how to check a buyer's agent is licensed — because an unlicensed person taking money up front is not a fee-model problem. It is a stop-the-transfer problem.

When an engagement fee is a warning

A large non-refundable retainer, combined with a wide exclusive territory and a success fee that still applies if you buy alone, is not a commencement arrangement. It is a set of traps that happen to be payable in two instalments.

A retainer demanded in cash, or to a personal account, or before you have seen the authority, is a warning with fewer clauses. So is a firm that will not put rebate disclosure on the same page as the engagement fee. Consumer agencies keep pairing written authorities with rebate warnings because the side payments are where week-one money meets a quieter conflict.

A retainer that is refundable only if you buy through a related selling office is not a buyer's-agency fee. It is a recruitment tool. Walk.

None of this means a well-run firm is wrong to charge one. It means the engagement fee should be the most boring line in the proposal: modest relative to the work, credited against a GST-inclusive success fee, and explained for the endings you hope not to use.

How to keep the paper clean

Put the amount, the GST-inclusive figure, the due date, the credit rule and the refund rule in the authority before you transfer. Name the account. Keep the receipt. If the firm also wants a credit-card authorisation for later disbursements, cap it.

If you are comparing a percentage shop and a fixed-fee shop, compare the retainers as their own column. Fixed fee versus commission will mislead you if you treat the success models as the whole cost and ignore the money that leaves first. A cheaper success model with a harsher retainer can be the more expensive campaign in every ending except a fast purchase.

Do not let anyone tell you the week-one invoice is too small to negotiate. Fees are not set by law. That sentence applies to the first payment as much as the last.

Then let the search start. The retainer has done its only honest job when the file is open, the brief is written, and you still understand what the money was for.

The short version

An engagement fee is the price of beginning, not the price of a house. In the industry-average shape REBAA describes, it sits beside a percentage or a flat success fee, plus GST, and it is often credited if you buy. It is also, very often, gone if you do not. There is no official retainer scale. Demand a single GST-inclusive figure, a credit rule, and written answers if you do not buy, buy without them, or terminate. Pay it after the authority is dull enough to keep.