Investors being robbed blind by “advisers”

Andrew its a number of things – Not so much Profit margins but Yes Transparency, Ethics and levels of Integrity plus the value of the service provided.

Scenario 1 – Commission Loaded on Top – this has been going on for the last 20 years and I can't believe its still happening with the knowledge of the Lenders. But its where a Property Marketing Company (PMC)  just adds a commission on top of the developers asking price. I am aware of a Queensland company that did this back in 2010 while running a seminar for around 200 people they approached numerous builders in Sydney and asked to have $20K added to the Builders Price as commission which they then flogged at the seminar to a captive audience over 3 days under the guise of an "Educational" Experience. Its called 2 tier marketing. Typically its the one stop shop approach where they have the inhouse experts – Solicitor, Valuer, Financial Planner, Mortgage Broker and everyone is in on the deal. So if the investors had actually done some homework themselves they could have easily approached the same companies and bought the properties for at least $20K less. And in most cases there are double commissions paid as there is also a marketing agent or Builders Sales person that receives a commission on the sales.

Scenario 2 – The Loaded Commissions – This is what the article is referring to – its similar to the example above but on this occasion the Developer has actually loaded a High commission into the project for the PMC – typically $35,000 to $50,000 as opposed to a standard Real Estate Agents Commission of around 2% to 3% of Sales Price ($10 – $15K on a $500K property). The position here is that the "Advisors" are selling the property to the investors to receive the High commissions while portraying to be looking after the investor they are Not acting in the interests of the investors at all – essentially if the PMC's where not involved the property prices could be reduced by thousands of Dollars and in some cases they are not valuing at Purchase price but due to the One stop shop approach they are being sold and financed generally using equity from other properties. If the investors then need to sell these properties in a hurry they are not selling for what they paid – Once again its Buyer Beware – Get Educated.

To be continued later

Hello Forum

Actually rereading the article and speaking to an Investor for Townsville – I realised that its $30K commssion to the Advisor – he tells me that some Property Marketing Companies are paying that amount of commission – so it makes me wonder how much more is actually built into these deals

Anyway Buyer Beware – Cheers

I totally agree Scott – You would like to think most advisers are impartial  or that they would declare an interest. It seems to me that transparency is one key in building good long term relationship with clients. A Real Estate Agent has to display the commissions he charges to Vendors and they must declare an Agents Interest if they own or have an Interest in the property they are selling as per the Act. So one would think that buyers dealing with R/E Agents are generally aware of the fees the agent will receive on a sale.
So why not get Property Advisors to disclose the same thing ?

The issue addressed in the article relates more to the large commissions being accepted by advisers in respect of them recommending certain investments – I suppose its like the issue of commission only  financial planners over the years where some it seems only recommended managed investments that paid the high commissions .

And I was unable to read the link to your article as it was blocked by my Virus scan program as a reported attack page.

cheers