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 real estate agents, mortgage brokers, accountants 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 practices that reward great selling. That’s right; there are no restrictions on what anyone can charge for providing 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 consumers should ask when they 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 the consumer or they are going to be paid by another source.
- 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 consumers on the right path to establishing if they are working with a good, professional practitioner or someone simply trying to profit from a transaction.
Property investing is a big financial decision with potential for great upside, but there are also significant risks. Consumers owe it to their future wellbeing to avoid being had. Just a small investigation into who they are dealing with can help sidestep disaster.