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ISCOVER
In last month’s blog, I talked about how investors can buy to outperform the market and the seven steps they should follow to achieve this outcome.
This month, I will explain the first step – understanding that free advice isn’t free!
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As the property sector is not regulated by a national governing body such as ASIC, there is no requirement for people involved in the property sector to have a minimum qualification to provide ‘property advice’. Therefore, there is an abundance of property spruikers, selling agents, developers and even brokers, planners and accountants who are all ‘selling property’ based on the ‘free’ education, strategy and advice they provide. This education often takes the buyer down the path of buying whatever property or strategy the ‘expert’ has to sell (the exception being those who offer genuine independent and unbiased buyer advocacy services).
Warning signs
Much of the property sold in Australia is sold on the basis of buyers being provided with ‘free advice’. That in itself should act as a warning to buyers, who need to learn more about who they are dealing with by asking better questions.
The people selling property to them aren’t required to (and aren’t going to) volunteer answers to questions investors don’t know to ask, because it may kill their deal – and, if they are commission sales agents, they need to eat!
‘Free’ services and how they are really paid
There are numerous clever and innovative ways of selling property in the marketplace today, including memberships, referrers, research houses, telemarketing, in-home visits, clubs, coaching and property ‘experts’. Urgency and exclusivity are often used in many of these sales methods to put pressure on buyers to make fast decisions, without allowing them time to seek independent advice on the basis that they will miss out. Often these methods educate their clients to buy their product, but they may not provide holistic advice.
Let’s review a couple of methods.
Memberships
One method is offering memberships to investor groups, project marketing firms or clubs for exclusive access to special deals that have been sourced by specialist acquisition teams who negotiate amazing deals on behalf of their members/buyers.
Sound familiar? Don’t be fooled. In its simplest form, this is sales and marketing ‘smoke and mirrors’ to hide the fact that they are real estate sales agents/project marketers/property spruikers/wholesalers of property. While they might sound like they are working for you and your interests, they are actually being paid by a vendor/seller/developer and are seeking the highest sale price possible. They are acting in the vendor’s best interests at all times, not yours!
Research houses
Research houses are often licensed real estate agencies marketing themselves as ‘research’ houses, or having specialist property research or acquisitions teams within their firm, who source or assess developments presented to them. They determine whether these developments meet particular criteria required for them to be willing to sell them to their clients or referral partners/business partners. On the plus side, some of these firms are more selective with the property they are selling than the average project marketer, but they are still selling from the limited selection that they have, and not from the total marketplace.
By understanding the methods in which property is sold and the underlying intent behind the ‘free’ advice provided, investors have the greatest chance possible of asking the right questions to ensure they are buying the right property to meet their needs and not the vendor's needs.
Next month, I will address the next step towards property prosperity, which is understanding personal and property risk profiles. Until then, go forth and prosper!
Some of the article content is extracted from the book Property Prosperity – 7 Steps to Buying Like an Expert by Miriam Sandkuhler © 2013, with the author's permission
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