Buyer's Agent Sydney

Jess the big difference between an $8 burger and an investment property is that an investment goes up in value over time, which means that trying to negotiate down in price all you’re doing is wiping off capital growth and in so doing the value in the properties around you I would much rather pull profit from equity straight away then having to wait on capital growth so I could be seen that a builders cash rebate is manufactured instant equity why would you then go and devalue the product by asking for a discounted price when you can take the cash straight away

 

Phil - if you're paying $10 for 'anything' that is worth $8 - there's no capital growth. It's worth $8.

You might as well pay $8 and keep the $2. It's not equity. It's literally your own money. The inflated price sale price is an illusion.

 

Jess it’s not worth $8 if a bank valuation comes back at $10 and a builder gives me $2 cash back, why would I then want to knock back the builders rebate and discount the price down to $8, that means I just lost $2 in equity or capital growth

 

This is known as manufacturing equity and I do it all the time as long as the repayments on the $2 pulled is covered by the rent, I have realised a profit.
There are four profits in property
1. Capital growth
2. Yields typically from rent
3. Tax depreciation
4. Manufactured Equity (building, renovation or options trading)

 

Name anything I have mentioned that is unethical or infact not a sound business model, I notice you are alluding to my book but have you even read it

https://www.amazon.com.au/Create-Th...harker&qid=1606707378&sprefix=phil+har&sr=8-1

 

Know nothing about you.
People can draw their own conclusions. As long as they have all the information.
A property book and a one stop shop doesn't impress here the way it does the person on the street.

 

Trainee I’m not here to impress you, I’m here to help educate the person who started the thread oh and BTW I’m not hiding behind a fake ID at least Jaquie and Jess are open and honest about who they are and what they represent, for that they have my respect, the same unfortunately can’t be said of you, which is a little unethical of you, don’t you think...

you have added no value to this conversation.

 

$14900 per property from the client

 

Hi Phil,

Welcome to the forum and thanks for your input.

With regard to a valuation supporting this, most developer/builder valuations are only supported by recent sales of the same development - I have never seen an OTP/H&L package supported via comp valuations outside of the development. This is because their method is to obtain a few sales, obtain bank vals by way of contract price, then use those valuations to support further sales as you suggest.

While in the immediate short term there is argument for this value being supported on a very technical basis, what almost always happens is that the market absorbs this higher price on a rising market and the growth in said development/building is slower playing catch up. In addition, comparatively to properties outside of said development, very basic research would almost always tell you that the underlying intrinsic value i.e. the non-direct comps in surrounding areas, outside the development, will most definitely be less than the new builds.

This is reasoned against by marketing using explanations like tax savings which is fallacy. If you're saving money on a tax basis, even via depreciation, you are losing money - tax savings are a tool to support cash flow in holding but the property must still rise in value over time to ensure value is gained. The claimed depreciation is deducted from the cost base on sale with the only benefit being the 50% CGT discount beyond 12 months of ownership.

You have also suggested that these valuations are 'manufacturing equity'. This is just simply not the case at all - manfacturing equity is not done by any definition by playing around with valuations and builders margins. Even under your own assumption that the valuation stacks up, this is it's valuation at sale and give it's new, how have you manufactured equity of any description?

The problem is that these rebates are usually paid from the developer to the marketing company or agent selling them on behalf of the developer. By the very nature of a commission being paid, that is obviously not part of the property's value if it's so easily extracted, it means the buyer is the one falling on the sword when it comes to the value. I can tell you first hand that our company has been offered up to an including $50,000 per property to recommend new builds to clients. There is simply no way for that money to be manufactered out of thin air on a new build unless the client is overpaying for the property. The maths just doesn't work. Either the developer is taking a bath on margins, of the buyer is taking a bath on value.

- Andrew

 

Hi Simon yes I can confirm that Buyers Club does not receive commissions from developers or vendors, we do also receive marketing fees from finance brokers and builders ect (hence the builders cash rebates) but these are declared to the client, we are open and transparent in all things

 

Hi Andrew

yes I agree with you that developers commissions around $50,000 will typically over value a property the simple solution to this is of course the properties that we provide our clients must meet bank valuation it’s a bank valuation that ultimately is the check and balance in this scenario after all it is the banks that are taking the risk here they are the ones putting up the bulk of the money, and yes I also agree that market valuation and bank valuation are two very different things however as a buy and hold investor myself the only valuation I’m interested in is bank valuation as I have chosen a generational wealth strategy and consider myself to be the custody of my children’s wealth therefore I’m able to minimise my exposure to capital gains tax by never selling and I access equity through lines of credit or offset facilities and this is how I have been able to leverage myself into the portfolio that I have today.

 

Hi Phil,

A bank val is a market val which makes them inherently the same, the bank either does a desktop and approves lending against that (usually conservatively), or sends a valuer out to do it. Banks tend to be conservative on desktop particularly, but this is somewhat diverging from topic.

The type of valuation I'm talking about which is when a company such as CBRE provided a val supported by recent contract sales in the same development. No one would debate valuations are important both directly and with respect to leverage via LOCs or equity drawing - that is how most people on this forum have grown their portfolio, myself included. The debate centres around the method by which valuations are given to the buyer in OTP/H&L packages and how that stacks up in real terms with the free market.

- Andrew

 

Hi Andrew
I don’t know of anybody wanting to sell their home that would go to a bank for a market valuation or to a property valuer such as Heron Todd White CBRE or JLL to determine the market value of their property bank valuations and market valuations are very much two different things. For market valuation or appraisal you would go to a Real Estate agent they will determine the market value of your property however a bank would go to a property valuer to determine the valuation on borrowing or equity release again the two are inherently different so on this we disagree

 

We're not talking about selling, we're talking about buying. When did this topic change to selling a property? Two very different processes depending whether you're selling or buying.

You're confusing the terms market appraisal and market valuation. Anyone selling their home gets an appraisal from a RE agent, but this is not a valuation - it is an appraisal and simply the agent's interpretation of what it would sell for. They vary wildly because there is no underlying methodology, other than a simplistic comparison to recent sales of similar properties.

A valuation follows a specific set of guidelines that prescribed and accepted by banks (see here) and as I have stated, this can either be a desktop valuation or they send a valuer out to get more detail and make it more accurate. A real estate agent does none of these things, nor do they provide you with an official valuation.

A bank valuation is simply another term, or a sub-set if you like, of a market valuation. They are the same thing.

A market appraisal and a market valuation are different.

- Andrew

 

Never heard a finance broker paying a marketing fee to an agent, I have heard of the builder marketing fees though, they are substantial.
Care to tell us how much you get from a builder for this marketing fee?

 

What happens if they make you sign a buyers consultancy agreement? Are they still working as a buyers agent ?