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The head of a mortgage management group has defended incentives paid by property developers to brokers after mainstream media reports highlighted the practice.
Barry Parker, managing director of Australian Capital Home Loans, said he had no problem with brokers receiving incentives from developers, as long as it is in the best interests of the client.
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“I’m okay with it, as long as brokers have a structured approach to creating wealth for their clients,” Mr Parker said.
“When it comes to the dollar amounts involved, most banks, as well as our company, value everything. So if it’s over the top, we’re going to know – the valuation is going to identify that.”
Mr Parker’s comments come after The Sydney Morning Herald reported on Wednesday that off-the-plan apartment developers are paying some mortgage brokers up to $20,000 for each lead that results in a sale.
“It’s easy to turn around and say that $20,000 is a huge commission, but when you look at the costs for advertising property, it could be well in excess of the $20,000 they pay for a referral source,” Mr Parker said.
“The fact of the matter is, none of us works for nothing. If you’re self-employed, you’re out there making your own wage and incurring all the costs – how people can turn around and say ‘you’re not allowed to make that amount of money’ is not right.”
However, Mr Parker said he does not support those who pay brokers big commissions for the sake of gaining clients and selling property that is unsuitable for them.
He added that the spotlight should be on developers and the real estate industry before regulation is imposed on brokers receiving kickbacks.
“The credit side of things is regulated, the financial planning side of things is regulated, but the real estate side is not. I’d suggest the regulation starts there.
“Developers are outside the real estate industry – they’re a law unto themselves as well – so maybe that’s where it’s got to start.”
Mr Parker’s comments come after the FBAA called on brokers to protect their professional credibility by not becoming involved in uncommercial kickbacks offered by developers.
“The NCCP is very clear in that it obligates brokers to act in the best interests of clients and to disclose all conflicts of interest and any commissions from other products such as this, where credit is being provided,” FBAA chief executive Peter White said.
Mr White said the “excessive” kickbacks reported in The Sydney Morning Herald appear to be “a clear conflict of interest”.
[LinkedIn: Is it ethical for brokers to accept kickbacks from developers?]
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