I read an article on Saturday in The Age talking about property advice. The reporter had spoken with the Financial Ombudsman, Alison Maynard. She spoke about commissions and fee for service and all manner of things but mainly related to shares and securities.
She also spoke about conflicted advice in the financial sector and how an unregulated property market is not a good thing. Nothing could be further from actuality if you understand the law.
Any person or company offering assistance in the purchase, sale or leasing of property where they are being paid a fee must be a licensed Real Estate Agent. Whoever is paying the Real Estate Agent is deemed to be the principal and the agent can only have one principal in any transaction.
THIS IS ENSHIRINED IN LEGISLATION!!
There is no ambiguity, there is no room for error, and there is absolutely no conflict of interest unless someone breaks the law. If you want advice on property simply employ an experienced, licensed, competent Real Estate Agent and make sure you are the one paying for their property advice.
The majority of people I speak to who have had woefully inadequate advice have usually received it from
1. A selling agent who is being paid by the vendor.
2. Their mortgage broker, accountant or financial planner recommended a certain development.
3. Spruikers offering free advice
Let’s break this down. The selling agent is contractually obligated to assist the vendor. His main focus is to get as much money from the purchaser as he can. This is what he is being paid for. Any advice you receive from the selling agent that actually assists you to get a better deal would mean the vendors agent has broken his contractual obligation.
The financial planner or accountants are very important in your overall investment strategy. They are there to organise loans, tax minimisation, cash flow projections and all things financial, but unless they are competent, licensed Real Estate Agents, they cannot assist you with the purchase of a property unless they do not wish to be paid. And any recommendation about the value of a property is not deemed professional information and therefore not liable to any comeback from you! HOWEVER, many of these individuals earn extraordinary sums of money from property developers. When Docklands was being developed in the early 2000’s almost any financial advisor recommending that a client purchase a “sure thing” in Docklands could earn around $10,000 or more simply for directing a potential investor there. This still happens today with off the plan sales all over Australia.
The third group are the very difficult group to manage. Some of these people will be Licensed Real Estate Agents, and very good ones. They will advertise themselves as property investment gurus. They will enshrine themselves in groups with names like Property Investment Professionals. They will explain what a good investment property is and will have fantastic spread sheets to back them up. These people will make it very clear they are there to assist you to find the perfect property. ASK THEM FOR A WRITTEN AUTHORITY TO ACT ON YOUR BEHALF AND EVEN IF THEY DO NOT WANT TO BE PAID – DEMAND TO PAY THEM SOMETHING. $1 IS ENOUGH. If you are not paying these people someone is, and there is only one other party in any property transaction – The seller (developer/vendor)
AND IF YOUR ADVISOR IS BEING PAID BY THE VENDOR ACCORDING TO LAW MEANS THEY MUST ACT IN THE BEST INTEREST OF THE VENDOR.
If your property advisor does not give you an authority to act and you are not paying for their advice, they are most likely working for the seller. I am yet to meet anyone who goes to work and doesn’t want to be paid by someone. AND THERE ARE ONLY TWO PARTIES IN A PROPERTY TRANSACTION – YOU – THE BUYER, AND THE SELLER.
Caveat Emptor or “buyer beware” is not just a saying about the physical property. If you are thinking of purchasing any property you should get professional Real Estate Advice from someone who is legally obligated to assist you. I am a Licensed Real Estate Agent in Victoria, I only assist people who are purchasing or leasing property. We do not sell any property. I charge a fee for my service and use an authority that has been approved for use by Consumer Affairs Victoria. It means I am obligated to assist the person who is paying me. There are many other reputable Buyer Advocates, or Buyer Agents in Victoria. You can see whether they are licensed real estate agents by going to this government website Justice.vic.gov.au
You can search by agent or company and you can see how long they have been in business and whether the Business Licensing Authority has put any restrictions on their license.
Ian James
Director JPP Buyer Advocates