There have been reports in the Courier Mail and online media in the last weeks which indicate that Property Spruikers are back in Queensland and are ready to ripoff hard working Queenslanders.
Property Spruikers are organisations that market themselves as residential property experts, however, are really just the primary catalyst in closing the sale on an investment property.
Investment or Wealth Seminars
Investment or Wealth Seminars are the most common places that you will find a Property Spruiker.
This is because Property Spruikers are normally part of a network of related and associated entities that draw benefits from the sale of properties in different ways.
Generally, investors and consumers are aware that Real Estate Agents act for the Seller and are not in the business of providing investment advice to Buyers.
However, licensed Real Estate Agents sometimes step outside their role as “Real Estate Agents” at these seminars, and advise consumers on investment and related issues such as negative gearing and provide training in wealth creation.
Even though the Agent is purporting to act on behalf of the investor or consumer, chances are they are probably accepting commission from Sellers, Builders and Property Developers.
How do the Spruikers sweep you off your feet?
The use of headlines from newspapers such as “Queensland set for fresh housing boom” or “Housing Market set to revive off the back of Queensland resources boom” are used to induce unsuspecting investors into purchasing property with ideas of unrealistic returns.
The promise of:
- rent at a guaranteed rate for a certain period of time; or
- an increased value of, or income from, the property in the future; or
- we’ll negotiate up to $50,000 off the price of the property;
are certainly used to grab your attention.
But don’t be so easily won over – these outrageous claims and representations by the Spruikers are just a marketing tool and should not be relied upon.
Who wins? Only the Spruiker wins
If you buy or invest with a Property Spruiker expect to pay at least 20 per cent (and perhaps as much as 30 per cent) more than the property is really worth.
This is because the Spruiker is selling you some “hot deal” at an inflated price.
The Property Agents and Motor Dealers Act 2000 (Qld) limits the amount of commission which may be charged on the sale of real property in Queensland but does not limit the commission on construction contracts. When house and land packages are sold, agents may circumvent the Property Agents and Motor Dealers Act 2000 (Qld) by charging excessive commission on the construction contract.
This practice certainly disadvantages a contractor by restricting its cashflow in the early stages of construction and is likely to see you end up with a property or unit at an inflated price.
What the research says
Research from:
- The Building Services Authority indicates that Property Spruikers target interstate investors who may be persuaded to take one trip interstate to look at properties for sale but are unaware of the real market value and are not in a position to visit a construction site on a regular basis; and
- The Australian Securities and Investment Commission has identified Property Spruikers as a problem area particularly for Self Managed Super Funds (SMSF), which is most likely due to the relaxation of restrictions around borrowing to invest in real estate through SMSFs in recent years.
How to spot a Spruiker or to know if you’re being spruiked
- Validate the price of a property through an independent or bank valuation.
- If you don’t have a SMSF and you are being encouraged to set one up to invest in real estate – obtain independent legal and financial advice first.
- Watch out for dodgy dot.com spruikers – particularly if you read something on the internet touting tax advantages of holding property inside superannuation’s law tax environment or you’re looking to invest overseas.
- Always consult with your property advisor in person – check out if they are actually selling the property or simply just researching or marketing the property.
- Under no circumstances use Property Spruikers – if you really want to invest in property buy from a normal real estate agent.
- Be careful of “Investment Divisions” in real estate firms, these can sometimes be a front for Property Spruikers.
- If it’s too good to be true – it probably is not.
