Spruikers can be a serious wealth hazard

Spruikers can be a serious wealth hazard

My last article was on ethics and lack of regulation in the property industry and how lack of compliance to standards and regulation has become a feeding ground for property sales companies known as ‘Spruikers’.

 

If you are a buyer, you need someone who represents you as the buyer to research and source a great property. Unfortunately many people purchase property directly from the property marketing company, or via their financial planner or mortgage broker who in fact also have a relationship with a property marketing company. Financial planners, but more commonly mortgage brokers, receive between 2-6% commission and sometimes bonuses without disclosing them to the buyer.

 

Other buyers may consider Real Estate agents more ethical. Whilst Real Estate’s must comply with regulations that marketing companies don’t, and while many are ethical, the fact is - Real Estate Agent’s represent the seller.

 

Real Estate Agent’s are simply not allowed to represent the buyer in the same transaction. Their job is to sell the property for the most they can - it is not to help the buyer negotiate a better deal.

 

Property marketing companies only sell ‘new’ property, estate agents sell mainly established property and if they advertise ‘new’ property you can be sure there is a hefty commission in it for them. The developer is the seller with ‘new’ property; the marketing companies are engaged to promote certain stock from certain developers, or a certain type of strategy or property - ultimately limited to just a few regions.

 

Some of the stock may be good but a lot of it is bad. The Spruikers will not sift through this for you in a professional and objective manner. There are a few rules of the games that need to be understood before buying an investment property;

 

1.     Only deal with someone who is entitled to be eligible for professional indemnity insurance and actually has it - not for selling property, but for providing advice on it.

 

2.     Only deal with someone that discloses what they will earn in the transaction. We know what real estate agents earn - but often a mortgage broker, financial planner, or spruikers will not and typically (unfortunately) do not have to disclose what they will earn on the transaction.

 

3.     Do not buy from anyone limited to a particular region or even a State. Do not deal with anyone who only sells ‘house and land’ or only sells ‘off the plan’. TIP: If they only promote ‘off the plan’ in particular, then not only avoid them, but RUN, RUN AWAY!

 

4.     Only deal with someone who is a member of PIPA (Property Investment Professionals of Australia) or at the very least PIAA (The Property Investment Association of Australia) and is a qualified buyer’s agent and/or property advisor. If it is a property advisor make sure they are qualified as a QPIA (Qualified Property Investment Advisor) through PIPA.

 

5.     Do not deal with someone who has vested interests in one property over another, nor anyone who has a vertically integrated company. An integrated company could include finance, properties, conveyance services, sometimes accounting and financial planning. These firms often charge ridiculous fees - they take a clip all the way through and they corral the process so there is little chance of accountability through the supply chain.

 

6.     There are some firms in the marketplace who charge up to $10k to ‘become a client’ - only to sell you one of their developments, where they make another $30-50k.  

 

Ensure your personal situation is being considered and if seeking advice ensure a ‘fact find’ is conducted and never engage anyone who fits into the ‘no go’ categories mentioned in this article.

 

Remember - Spruikers can often be a serious wealth hazard.

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