With misleading rent to buy schemes gaining momentum and property spruikers increasingly targeting the elderly and the ill, the dodgy practices of a few are threatening to tarnish the reputation of the property industry. Properties, once considered safe and reliable investments, are increasingly being used by unethical operators to victimise those looking for a stable source of income.
A predator in the property sphere may cost someone their retirement savings, their biggest asset or their home.
JONATHAN CHANCELLOR, editor at large of Property Observer, says there are a number of ways to spot an investment trap.
“Dodgy operators try to get you into something without allowing you a second opinion from your accountant or solicitor, and sometimes not even your partner or spouse, given the intensity of their â€œact nowâ€ imperative.
“But no deal being pushed by a spruiker is going to simply disappear overnight. If it did, they would be out of business.
“So you are entitled to sleep on it – without signing anything – cooling off promise notwithstanding.
“And then overnight, take the time to just do some simple research. The internet makes it easy. Research the sales person, their team and their potentially dodgy practices in online chat rooms, which have plenty of feedback on the worst of cases. Then research the property, its neighbourhood and the promised returns.
“If it still looks good, then getting an independent legal and financial review of any transaction could save you your hard earn income in the long term.
“Remember, property investment falls largely outside the jurisdiction of major regulators, so you are on your own.
“You ought to sign only once you are completely comfortable with the clarity of the offering. Quite simply, if you lack investment knowledge – and who doesn’t – then you need an independent advisor. They could be your savvy estate agent or mortgage broker acting as an honorary sounding board, or a non-commissioned professional who preferably doesn’t charge over the top, but who knows their stuff.”
While strict regulations exist for financial advisors and real estate agents, property advisors, or â€œspruikersâ€ operate in much more nebulous territory. They could be a regular on the investment seminar circuit, the face of an investment scheme or your own accountant. With such unclear waters, property investors are left largely to take care of themselves.Property Observerapproached some leading advocates of ethical operations in property field to ask them about how to spot a dodgy operator.
Unfortunately our property investment industry remains unregulated. Given that property is such a high value transaction, which can attract large commissions and incentivised sales campaigns from builders and developers, it naturally attracts some operators who are more interested in their own self-gain than the investment returns of their clients.
For me the two main warning signs of a dodgy operator are:
- A reluctance, or even worse, a total refusal to talk about or disclose how much they are being paid for recommending a property.
- A hard sell in terms of what property they are pushing. Usually the classic line about acting now, as â€˜this opportunity wonâ€™t lastâ€™.
In any field of work there is always a chance that a â€˜bad eggâ€™ or two will find their way into a professional environment, even if their profession is licensed or regulated in some way.
Having said that, PIPA is steadfast in its belief that regulation is necessary in order to limit these kinds of operators.
When it comes to steering clear of dodgy operators, PIPAâ€™s advice is to be very cautious, do your due diligence, ask plenty of questions and donâ€™t be rushed into anything.