How is your property advisor getting paid?
July 31, 2018 - Blog
No one likes to talk about how much money they’re making, do they? So how is your property advisor getting paid?
When it comes to someone giving you property advice, you must ask that tricky question.
Why is that?
Well, their answer can sometimes be something that you don’t want to hear.
An independent property advisor is key
As I’ve written about before, unfortunately there are people out there who are giving property buying “advice” when really they’re just recommending you buy a property from which they’ll receive a commission for the sale.
Of course, that’s not advice and it’s not what independent buyer’s agents or professional property investment advisors do either.
We are 100 per cent independent and the only person we’re paid by is our client – either for buyer’s advocacy work or for strategic property investment advice tailored specifically to them.
We charge a fee for a service.
Royal Commission findings
Alas, as the Royal Commission into the banking sector has shown, there continues to be unscrupulous operators providing property investment “advice”, but what they’re doing is just lining their own pockets with money from their clients and from whoever is paying them an “incentive” to offload properties for sale.
Most savvy investors have a team of professionals they work with to ensure they’re buying the best properties every time.
This team might involve a buyer’s agent, a mortgage broker, a financial planner, an accountant and a property advisor.
Each one of these professionals have a part to play, but they also shouldn’t give property investment advice if it is not their speciality and especially where there may be an incentive, because of referral fees, to do so.
Associations like the Property Investment Professionals of Australia (PIPA) and the Real Estate Buyers Agent Association of Australia (REBAA) exist to provide practitioners with support and training in each field, but they also require adherence to a strict code of conduct for membership to be maintained.
I am proud to be an active member of both associations as well as being a committee member for the Buyer’s Agents Chapter of the Real Estate Institute of NSW (REINSW). We believe in following the highest professional and ethical standards in the industry, adhering to best practice, and most of all, providing the best available service to our clients.
As well as asking your “advisor” how they are being paid, consumers should also question which property investment industry associations they belong to, which is a signpost of their commitment to ethical practice and to the sector as a whole.
Expertise, not just advice
There is nothing wrong with mortgage brokers, for example, giving general property advice as long as they have the expertise to do so and are savvy investors themselves.
Even with new legislation coming into effect in New South Wales later this year, which requires anyone involved in taking a referral fee for a property transaction to be licensed, this situation is unlikely to change.
That’s because “advisors” will just apply for a real estate licence so they can continue to receive financial kickbacks from a developer, vendor, builder or a property marketing company.
While they might be legally required to disclose their commission that doesn’t mean that it will reduce the number of people who fall victim to taking the property investment “advice” of someone who doesn’t know what they’re talking about.
Which is why you must ask how your property advisor is getting paid.
If any of their fee is coming down the chain from a developer or vendor then you should be very cautious and question if there is a conflict of interest in their advice.
If there is a conflict, then it’s makes sense to delay making any decisions until you have clarity or, better yet, only work with an advisor who is being paid by someone you know very well – and that is you.
If you’re looking to get help with your next property purchase or investment strategy and would like advice from a professional, independent and ethical property advisor, then please get in touch with STRAND Property Group today: