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Association says NO to excessive broker kickbacks

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Australian Broker | 16 Apr 2015, 08:25 AM Agree 0
An industry association has responded after reports of developers enticing brokers with unethical referral fees
  • Concerned Broker | 16 Apr 2015, 09:07 AM Agree 0
    If that is the case of conflict of intetest.. What is then the difference when an aggregator is also related to a Real Estate entity and places its brokers to support the Real Estate Agents???
  • Rosemary Johnston | 16 Apr 2015, 09:07 AM Agree 0
    Great comments Peter! We are aware of a number of mortgage aggregators who have arrangements like this with hungry property groups so that their brokers can access commissions. The aggregator also benefits and we have seen some post record profits as a result. When the business is driving this behaviour and profiting how does the broker respond?
  • tina | 16 Apr 2015, 09:14 AM Agree 0
    Thank you Peter as I and many others have never received any payment from any real estate agent or property developer nor have I ever paid any one for referring clients to me. Shame if this is going on in the industry as yesterday's comments indicates this is so.
  • Nick | 16 Apr 2015, 09:39 AM Agree 0
    There is always going to be some commissions being paid to the players of a transaction and that is what we are in business for. The key point is that it should not be excessive. The next question is - how much is excessive? Total commissions should not exceed what a real estate agent would make on a standard sale. It is up to the individual to judge this from what is being offered.
  • Dave Robinson | 16 Apr 2015, 10:03 AM Agree 0
    I think this is a very simplistic view at this situation. A real estate agent gets paid to sell a property, their fee is somewhere between 2-4% on average. A $500 000 property would attract a real estate agents fee of $10 000 (using the lower end) as well as advertising fee's, listing on their website fee and fee, all of these fee's are funded by the seller whether it's you or me selling or a developer selling. So a developer wants to use another method to sell their property with the hope of saving some costs, most business owners would call this action "required" as per their duty as a company director to ensure their business is profitable and sustainable.

    In relation to the broker we have to declare the commission and the amount as per NCCP and as long as this is done then I can't see what all the fuss is about.

    Conflict of interest gets bandied about a lot yet I have not seen a case promoted by ASIC, MFAA or the FBAA where a member or ACL has been called out on it. If the client is fully aware of the situation, the lender, valuer and solicitor are all at arms length then please explain the conflict.

    One thing I will note in closing is that most of these comments (and the one that kicked it all off) are anonymous, that says more than anything else.
  • Michael Kent | 16 Apr 2015, 12:03 PM Agree 0
    Dave Robinson - the problem is most of the time these kick backs are NOT being revealed to the client.

    They are easy to hide as the client gets one copy of the contract that does not disclose any such referrer payment and then the property developer / investment property company keeps another version of the contract on file in case they get audited which DOES disclose the commission paid.

    I have had people from these companies tell me to my face they are willing to do that because brokers raise the NCCP issues.
  • Scott Hastings | 16 Apr 2015, 12:48 PM Agree 0
    I believe the decision to accept these fees depends on how you see your business (as long as the fee is disclosed). Personally I see my role as advising on lenders and loan structure with general advice on investments, not on recommending specific properties. I think we have all seen issues with valuations not stacking up on many of the deals which are promoted through property groups. I am after long term relationships with my customers and I don't want my clients thinking I enticed them in to a particular investment choice which does not meet their expected returns, so I choose to distance myself from these property groups. If after evaluating the deal my client wants to purchase such a property I will not stop them, it is after all their choice, but I will not accept any form of fee. Bottom line, each to their own but it needs to be disclosed.
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