The property industry is awash with operators vying for your business. How do you know who to trust?
Blogger: Ben Kingsley, Property Investment Professionals of Australia (PIPA)
It’s not hard to understand why the property market is packed full of property promoters, marketers, spruikers, so-called educators and wannabe property investment advisers.
The perfect combination of high-value goods and an unregulated market naturally attract the quick-talking, smooth operators, whose eyes wash over with dollar signs at the thought of the lucrative commissions they can make from wooing the next susceptible prospect.
You see, not having any real regulation within our industry leads to several connected problems.
First, without regulation just about anyone can pull on a smart suit and offer advice on property investment. Moreover, associated professionals such as mortgage brokers, accountants, real estate agents and financial planners will often claim to have a thorough understanding of property investment, offering advice on property without genuine qualifications yet without the risk of being prosecuted.
Second, without regulation you have an industry that has developed itself around practises that reward great selling. That’s right; there are no restrictions on what anyone can charge for providing you a service related to purchasing a property. So huge commissions, kickbacks and soft-dollar payments are thrown around the industry, attracting takers who pass referrals to these operators for the quick and easy cash they make in return.
Finally, without regulation, such commissions, kickbacks and soft-dollar referral payments often go undisclosed to potential clients. They don’t know or realise that as much as 10 per cent of the value of the property they are buying could be going towards commissions among a series of “networked” operators.
Put all this together and you can see quite clearly that many innocent consumers have – or will – get their fingers burnt.
This is why Property Investment Professionals of Australia (PIPA) is working hard to get the message out there and warn consumers about the risks of getting poor advice from the wrong operators, whose only true agenda is about making their bottom line shine. There are three simple questions you should ask when you seek property investment advice.
• Are they formally qualified as a property investment adviser? In other words, what education or certificate qualification have they obtained?
• How and what are they being paid? In simple terms, there is no such thing as a free service. Someone is paying them, so it’s either going to be you or they are going to be paid by another source. You need to know how much it is and decide if it’s a fair amount for the service you’re getting.
• Are they a member of a professional association and is their business an ethically operated one? Associations such as PIPA insist that members operate under a strict code of conduct. This code is a combination of rules members need to adhere to, relating to honest, ethical and transparent dealings with consumers.
Getting truthful answers to these questions will put you on the right path to establishing if you are working with a good, professional practitioner or someone simply trying to profit from a transaction with you.
Property investing is a big financial decision with potential for great upside, but there are also significant risks. You owe it to your future wellbeing to avoid being had. Just a small investigation into who you are dealing with can help sidestep disaster.