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'We're not all spruikers', claims top property investment adviser

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Australian Broker | 27 May 2013, 08:00 AM Agree 0
A top Australian property investment adviser says recent claims that the entire industry is comprised of 'spruikers' are unfair and unjustified - but doubts remain
  • Sydney Broker | 27 May 2013, 11:14 AM Agree 0
    "significant reserach methodology" you 'claim' Dr Tony. Hmmmm. If it looks like a duck and quacks like a duck...... How much of the 77% rejected wouldnt pay your commission rate? Why do Colliers and CBRE still get the best projects? (because they dont have to pay referrers and so charge less)
    Government should cap the gross amount of comms payable to 3% regardless. By creating an even playing field between selling crap and quality - the shonks may as well sell quality. Most disaster stories inclusing Westpoint, Timbercorp, Gold Coast properties and so on all come back to people chasing above normal commissions to sell sub standard investments.
  • BJ | 27 May 2013, 11:18 AM Agree 0
    At 3% referral commission, one wonders at the rigorous due diligence process [one of the big banks] and Mortgage Choice undertook.
    A clear conflict and investors relying on advice from these spruikers and clearly conflicted mortgage salesmen should heed the Government of WA’s warning.
  • Todd | 27 May 2013, 11:35 AM Agree 0
    How surprising... the reason the property investment industry has a bad name is due to non disclosure of commissions and Tony not disclosing is not a good thing. I am offered referral fees from many firms that do offer 6% commissions. With inner city units selling at $500,000 x 6% = $30,000. Big dollars that the investor pays ( the person they are suppose to be working for )...
  • Concerned | 27 May 2013, 01:01 PM Agree 0
    "Hayek wouldn’t confirm commission rates, saying the figures are commercially sensitive". This must mean that the client doesn't know either. Wouldn't like to be in 'one of the big banks' or Mortgage Choice's shoes when they do!
  • Garry | 27 May 2013, 01:32 PM Agree 0
    Its Henry Kaye all over again. Will these fool clients of theirs ever learne? I doubt it.
    These property seminars should be banned across the country. They are simply set up to sell property - nothing more. If people got of their fat backsides and did some research like real investors then they would find these prooperty seminars are mostly crap and ultimately lead to exessive fees tacked on to the property prices.
  • Geoffrey Keeler | 27 May 2013, 02:48 PM Agree 0
    Get real! Every agent charges commission, it just varies depending how good they are. The good ones (like McGrath) charge 3% once they sell it – but they also need a marketing budget, so add another 2-3%. Project marketers like CBRE charge commission AND need marketing budgets. Does anyone think those weekly full page ads, fancy display suites and sales team cost nothing?! Project marketers will sell ANYTHING – I’ve heard developers are offering 10% commissions for overpriced, oversupplied properties in Melbourne, properties which Colliers will tell you are amazing... There’s nothing wrong with making a living, as long as you keep your integrity.
  • Papery | 27 May 2013, 05:05 PM Agree 0
    Is it any wonder valuations fail to stack up on these deals! And then we have the bleeding heart developer bleating on about high infrastructure charges & council wonder the aussie ppty market is in a mess for new many snouts in the trough me thinks!
  • QEDRisk | 27 May 2013, 09:09 PM Agree 0
    I find it significant that the head of the industry body PIPA said last week that they would welcome more regulation in this arena! I say bring it on ASIC - make this industry live up to the same standards that mortgage brokers have to!!
  • BJ | 28 May 2013, 08:26 AM Agree 0
    Geoffrey, the debate is not isolated to making a living but a far deeper and damaging to investors easily swayed by the hype “you too can own several investment properties” and “make wealth through property investment”. Absolutely nothing wrong with making a living! And, as for the good ones, well this is very subjective indeed.
    The issues as I read the comments, is a clear focus on “non-disclosure” and “excessive” commission and conflicts of interest. Only those with purely self-interest miss the point.
    The property investment highway is littered with disasters and the agents, spruikers and the referring mortgage broker would appear to be oblivious to this fact. One wonders if the high level of commission paid throughout the chain has any influence on the so called good advice.
    At what point does a Mortgage Choice salesman become a property investment expert. After they part with a franchise fee and have completed a week or two training. Why would the [one of the big banks] get involved? The answer is the quantum of commission and ability to sell further loans.
    Investors in any asset class can only make an informed decision when there exists full disclosure and the advice is not conflicted. That is the point being driven home in this thread.
  • Todd | 28 May 2013, 10:12 AM Agree 0
    To Geoffrey, The difference between McGrath, CBRE and project marketers is Disclosure. Real estate agents by law must disclose commissions, approved marketing costs and any referral fees paid. If vendors decide to pay 3% commission along with another 3% marketing budget, they have agreed to this. These developers and marketers selling high rise units in Melbourne, by law, do NOT have to disclose these ridiculous commissions.
  • Papery | 28 May 2013, 10:14 AM Agree 0
    Well said BJ! Clear disclosure on the comms & conflicts of interests. Maybe the spruikers & RE agents need to go to a fully disclosed fee for service instead of comms hidden in the build & land contracts...while there at it how about regulating what they do & how they do it & bring in six feet of requried paperwork before they even get near a contract. Lets not stop about ongoing Proffessional development...that might weed out the shonks & just leave the professional & credible operators.
  • Doubtful | 28 May 2013, 11:00 AM Agree 0
    Interesting that Tony Hayek's development company was the major supplier of off the plan properties to the now convicted mortgage broker Catherine Thompson. Interesting that all his properties never hit the right valuation mark and that the purchasers were made to make up the equity shortfall. The commissions on these properties were magnet to the greedy. Not only did the broker receive the loan commission but also the $15-$20k property commission. Talk about a conflict of interest!
  • Wayne | 28 May 2013, 11:05 AM Agree 0
    How can you be "helping" buyers when you are getting paid a masive amount by a developer? Also new stock makes up less than 2% of all properties yet the so called "researchers" only recommend the 2% new. That's because the commissions are there. If you want independence then you have to pay for it and see a Buyers Agent who is at least working for you.
  • The Watcher | 29 May 2013, 05:33 PM Agree 0
    Wow. Mortgage Brokers calling the "kettle black". It wasn't that long ago that the same things were being said about our industry - brokers that churn clients just to be paid up-fronts; fudging income figures on Low Doc loans, creative accounting on Tax returns - or are your memories that short?

    Yes, there are cowboys in the property industry, just like there are in our own industry.

    Pointing the finger of blame and making sweeping generalisations doesn't help. If we really want to look after property investors, invest the time into working with property advisors who you can trust? I for one have always found Blue Wealth great to deal with and they have looked after my clients all the way through the process.
  • Todd | 30 May 2013, 10:43 AM Agree 0
    To Watcher, thats the exact point, the mortgage business has undergone massive reform with NCCP and now ASIC watching us... the cowboys in the mortgage space are slowly losing their licenses...but the investment property industry has not. I am a broker and a Buyers Agent and agree we need to get these cowboys out of the market or to clean their act up. The customer service of Blue Wealth is not at question here, I'm sure they do look after your clients... what they don't do is disclose their commissions. Question for you - do you disclose your commissions that you receive from Blue Wealth to your clients?
  • The Watcher | 30 May 2013, 11:12 AM Agree 0
    Todd, yes I do. I'm perfectly ok with businesses that receive commissions and referral fees. I believe we should first seek to understand why such commissions are being charged and their methodology before making sweeping statements and generalisations about a business. Companies like Blue Wealth give developers access to investors nationally, which would cost them as much, if not more in marketing costs, with less likelihood of a sale.

    So they divert part of their marketing budget to their outsource provider. And (@Sydney Broker) don't think CBRE and Colliers get the best projects - they don't. They just spend big $$ on marketing - paid for by the developer.

    And in any case, many purchases, such as those in Queensland, the commissions have to be disclosed.
  • Todd | 30 May 2013, 11:40 AM Agree 0
    To Watcher, earning an income is fine but when valuations come in low, thats an issue. We have a client now that purchased in Gladstone a House and Land package with Blue Wealth and the valuation has come in $30,000 short.They were recommended Blue Wealth through a Mortgage Choice Broker. The shortfall was coincidently the same amount as the referral fee to the Mortgage Broker... now thats an issue!
  • The Watcher | 30 May 2013, 04:50 PM Agree 0
    Todd re: Gladstone valuation - this was not unusual across many Queensland properties sold off-plan by agents in the last year or so.

    Why do you assume the low valuation is a pricing issue? Are you saying that you trust the valuer's assessment 100% That would be a first for a Broker wouldn't it? Tell me you have never had a questionable valuation on a property.

    Interesting now that credit policies easing that valuations for off-plan properties are coming in on purchase price in QLD. Is that coincidence?
  • Todd | 31 May 2013, 10:21 AM Agree 0
    Watcher, so what you are saying is that even though the valuations are coming in low, Brokers like yourself and Blue wealth would continue to promote these H&L packages? Now one valuation coming in low, I can accept but a continuing flow of them is not acceptable. Valuers use comparables to put a value on a property. On H&L packages they use the actual, not inflated land value and add that to the actual, not inflated construction costs. Valuers know the real numbers and value accordingly. there are however tricks of the trade that property companies use to set higher comparables. In relation to my valuations, I have not had a low valuation in over 600 properties. I buy in the low part of the cycle where I can buy well under market value. In relation to the easing of policy, I haven't heard of this nor seen any evidence. I cant imagine a lender continuing on finance if a valuation comes in low unless there is a second security ( tricks of the trade )... the moral part then some into play as to whether the client was told about the low valuation or not?
  • The Watcher | 31 May 2013, 11:36 AM Agree 0
    Todd, one of the risks with Off the Plan purchases is that the valuation will come in low. Valuers, by nature, are conservative and will apply this more often to brand new properties. That doesn't necessarily mean the valuation and the market price are the same. That is why research is critical.

    Now you may be a buyer's agent but do you specialise in off the plan? How extensively have did you research the Gladstone market yourself? How can you be so sure about the prices? It would be like a GP telling dentist how to diagnose teeth
  • Suspicious | 31 May 2013, 12:10 PM Agree 0
    Todd, I have worked closely with Blue Wealth and had many clients buy through them with great experiences. I'm questioning what you're saying, as I know for a fact that Blue Wealth have never sold any house and land in Gladstone... where did you conjure up this story, or any of your other 'experiences'. Questioning people about their integrity loses its shine when you are lying. Please, tell us more about the 600 'great' properties you have sold, I have clients interested in investing and maybe I can refer them to you since you can guarantee no val shortfalls. Before I do though, what benefit will get out of it?
  • Todd | 31 May 2013, 12:28 PM Agree 0
    Watcher, This is exactly why I do not buy Off the Plan. I prefer to buy 5-7 years later when they have come down in price by $80k - $100k. Yes that much. So is offering Off the Plan properties that are consistently getting low valuations and then decreasing in value even further a good business decision? I have actually researched Gladstone and the reason for not buying there is supply and demand. There are currently 1875 properties for sale in Gladstone. The actual number is far greater as many adverts are advertising multiples in the one add. It also does not include the hundreds of properties under construction that will to the list for sale and for lease. There are 521 properties for lease, and again many adverts are listing multiple properties in the one complex. Population is 58,000 for the LGA. There is a massive oversupply of properties that is only going to get worse. If the multi billion $ projects were going to increase the population extensively, why are there so many for lease now... why are so many rent adjustments along with sale price adjustments occurring? It's a buyers market, except for the fact that your property will sit vacant for a period of time. Now with that info in mind, this supports the "real" market value actually being below that of the valuer... not above. I ask you, as a mortgage broker, how much research did you do on Gladstone? And why do you only offer your clients new properties?
  • Todd | 31 May 2013, 12:33 PM Agree 0
    Hi Susicious, Well a client of ours whom has purchased recently in Gladstone used a Mortgage Choice broker who referred them to a Blue Wealth property in Gladstone. The fact that you cannot even use a real name makes your comments questionable. I am an open book and happy to chat to you about referring clients, although we do not pay referral fees... still interested??? I assume not!
  • Todd | 31 May 2013, 01:29 PM Agree 0
    Suspicoius, If Blue Wealth have never purchased in Gladstone, then what's this?
    On page two it clearly state that Blue Wealth did in fact sell properties to clients in Gladstone. Happy to take your public apology on this forum, but I'm sure it will never come. Funny too how it talks about massive valuation shortfalls and how they convince clients to continue to buy...
  • Suspicious | 31 May 2013, 03:42 PM Agree 0
    Todd, interesting that your story has changed from 'we had a client who bought H & L through Blue Wealth that had a $30,000 shortfall' to 'a client of ours purchased recently in Gladstone'. Just trying to work out what actually happened (if anything did happen at all) and why you'd make something up? You're right, 'Todd' adds plenty of credibility to your story, even if it was fictional.
  • Stuart | 31 May 2013, 04:12 PM Agree 0
    I have a client who has purchased an off the plan high rise in Melbourne. I spoke to the vendor regarding contact details for the valuer, The vendor referred me to a representative of the developer who is now there on site, and in her words, walks through with the valuer for every inspection.
    She assured me the valuations are now in progress.The loan is approved subject to valuation. I now learn that the valuation is delayed for unknown reasons.
    If I trust my intuition, and I do, it is telling me that this valuation will eventually come in well short of the mark. The client purchased through a high profile company that likes to flog properties at seminars and then look after everything else as well including loans and solicitors etc.I may be wrong but I smell something very fishy about this whole deal. I would put money down to say that the client could very well be in for a nasty surprise. I am so glad that I am just a broker trying to raise the money for the purchase and not involved with the property side of things. These are good clients and the finance is not a problem,as long as the val comes in as expected.It will be interesting.
  • The Watcher | 02 Jun 2013, 07:00 AM Agree 0

    Where did I ever write I "only" offer off the plan to clients? Wrong assumption.

    Most properties can rise and drop in value within a 5-7 year period - it's part of the market cycle and has little to do with whether a property is purchase off the plan.

    I am also curious about your client that bought in Gladstone - did you actually attempt to speak with Blue Wealth and get their side of the story?

    Gladstone - Your research may be correct now, but where were you 8 years ago when Gladstone was just starting its cycle? Invest your time focusing on where the opportunities for growth exist today - there's a great seminar I can recommend.
  • Todd | 04 Jun 2013, 02:12 PM Agree 0
    Suspicious, sounds like you may actually work for blue wealth, your passion is intense. So who was lying, not me as my client will be featured in a future investment magazine in an article where they talk about mistakes they have made investing. Would seem though that you know little of blue wealth and where they invest as a simple google search revealed they did in fact invest in gladstone. It also states in there that they had many valuation shortfalls. When i invest for my clients, i only buy properties for them where i personally invest, put my money where my mouth is, can you say the same? and i dont invest in mining towns. Gladstone in my opinion is about to experience some tough times in the properties in the LGA. Location aside, if you are offering your clients properties where the valuations are coming in low costantly, are you doing the right thing by your clients?
  • Marco | 25 Mar 2014, 10:06 PM Agree 0
    To Todd
    hi I have been reading all the comments in this thread and have been to a blue wealth speil. It did sound very good when we were there but when we got home and looked deeper we arema little sceptical. My question to you is who do you work for and what services do you provide? How much do you charge etc...
    hope to hear from you.
  • Kiran Saldanha | 25 Nov 2015, 10:00 AM Agree 0
    This maybe a dated article - but as someone who has sat on both sides of this discussion I thought I'd provide me feedback. Some groups provide exceptional education to clients - but the backdrop is always the same. I bought into and sold two of Bluewealth's best projects - rated the highest by their research methodology - however, both projects failed to deliver a decent outcome at settlement and three years on we have valuations that are still over 20% short of our purchase price and rental returns of $420, when we were promised $500 - $600 by now ..... it appears the $42,000 commission was the driver for the unit I bought - as the broker who referred the deal a 3% commission was paid - which is what many finance experts and groups like to work with the property marketers ....
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