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Regulating the Property Industry - Brand new / OTP / H&L packages - People Being Burnt

Discussion in 'General Property Chat' started by MsAli, 28th Aug, 2016.

  1. MsAli

    MsAli Well-Known Member Premium Member

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    Hi All,

    Been seeing people sucked into OTP and the H&L packages in areas with a lot of land and over supply, where no research is done and the decision is completely outsourced to the sales people. Nothing new, been happening for years.

    Some of these services call themselves buyers advocates and charge some sort of a "low" fee compared to typical BA services. People are putting their entire life savings on the line to enter markets where they are already paying $200k-$300k more than established homes. Really.

    It's frustrating when people want your affirmation for such a purchase and are unwilling to really hear the opinion.

    For the average person....

    Why is it so easy to get sucked into these great deals?
    What's the reason more thought isn't put into the decisions? Is it because it's the "easy" way out and someone can "take care of it all"?

    Property industry needs regulation and some appropriate ethics training. Or are pushy salesmen/women not to be given responsibility that they are selling a product often not fit for the buyer? They are just doing a job for which they are paid a commission?

    Understand people need to make $ and there are a number of developers on the forum. However it is quite concerning to see when people put themselves backwards financially by signing on the dotted line where they don't make money going into the market but the sales guy certainly does!

    Thoughts?
     
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  2. thatbum

    thatbum Well-Known Member

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    Depends what problem with them it is that you think needs regulating. I think there's issues in that sphere - but I don't think you can do much about people overpaying like in your example.
     
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  3. cheekykoon

    cheekykoon Well-Known Member

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    It would be a most efficient economy if 100℅ knowledge is provided to the decision maker. However, chances are the decision making process of the average investor would not be well tuned enough to make a "sound" decision to what to do with his money best. Most often than not, the decision to enter is based on "hopeism" and what alternatives are there given the time frame. Alternatives would be paper assets and perhaps other "exotics investment" between a rock and a hard place, more often than not, he chose the property, going in fully aware it's 200-300k, that he can hold and the product will at most be a "forced long term holding". Really, how much do we really know?

    Just my 2 cents.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Remove all restrictions on registration - real estate agents, lawyers, b&p, financial services providers, insurers, banks, financial planners, auditors, tax agents, builders, brokers - feed them all to the sharks, remove the barriers to doing business.
     
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  5. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Thet get sucked in by the sales pitch because of ignorance and half baked mythical knowledge.

    Platforms like this are the saving grace for many and probably the only solution I can think off. That is self eduacation by reading, listening, asking questions, thinking and then finally applying that knowledge with a team of tried and trusted professionals on your side to help fill the knowledge gaps.
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If they were regulated how would it change?
     
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  7. pinkboy

    pinkboy Well-Known Member Premium Member

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    We should regulate stupid people. That way OTP purchasing would pale into insignificance to real issues in the world.

    pinkboy
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    ...but let's not get suckered full stop.

    regardless of product, homework is always required, problem is many people believe anything without looking at the hard evidence to support the claims....

    Recommendations are cheap and people also get suckered into this and some are like sheep they follow the person, ignoring the product... silly but true
     
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  9. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Whats the cut off point for that :)

    If its driving a car and the skills that should go with it, thats 95% of the populace, in Perth anyway.
     
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  10. MTR

    MTR Well-Known Member Premium Member

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    j

    it would not, there will always be silly people believing anything regardless
     
    Last edited: 28th Aug, 2016
  11. pinkboy

    pinkboy Well-Known Member Premium Member

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    If you have to ask - you dont make the cut! :p

    pinkboy
     
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  12. MsAli

    MsAli Well-Known Member Premium Member

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    @Colin Rice we were saved from OTP in 2009. Fortunately, doing the numbers from day 1 helped. However a greater help was asking on SS whether it was a good idea to buy OTP and being left with about $9 at the end of the month :eek:

    @MTR - agreed, you can't just outsource and "hope" it will work. Some of the examples I've heard is, people...:

    1. Bought OTP in Sydney so thought it will work in other cities
    2. Think it's low maintenance so they don't need to go look at it - even if it may be a small block in say Ipswich or Logan or Deception Bay (for example)
    3. Buying because it's fashionable to buy an investment property....even if it's in a peaked market or in a falling market - had two spectrum of choices raised by someone - with no other research in between
    4. Buy given the property mentor told them they had to buy X OTPs to get to their goals. Not to forget the $25k commission on the contract they signed
    5. Buy because Because they can save tax
     
    Last edited: 28th Aug, 2016
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  13. MsAli

    MsAli Well-Known Member Premium Member

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    You'd think, they'd be listing out the true cash flows? Comparable sales? Substantiation for the "great" investment. But then may be that's what individuals need to do themselves....
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The financial planning industry is very heavily regulated. This is probably slowed down the cowboys but not stopped them.
     
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  15. Scott No Mates

    Scott No Mates Well-Known Member

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    Link to legislation: linky

    Unfortunately it's not failsafe.
     
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  16. Connor

    Connor Well-Known Member

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    Property investing can be very daunting for some, especially the first timers and inexperienced. We all know that it takes a massive amount of time to find deals, research, do the numbers, DD etc. Then there's loan structure's, buying structures, lawyers, builders, accountants etc... Its easy to for anyone starting out to get completely overwhelmed... and not even knowing where to start.

    So when they see these sales agents offering everything packaged up and provide you with all these fancy figures shows excellent returns and predictions (usually based on best possible scenario).. It just becomes easier to sign up and have it done for you, rather than go it alone. Especially for the inexperienced.

    Whats sad is that they exploit trust. You trust them for their professional opinion and that their packages are well researched and priced accordingly. Unfortunately, that research is based primarily on the $$ returns for themselves.
     
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  17. MTR

    MTR Well-Known Member Premium Member

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    Anyone that is new to property investing is vulnerable, giving poor advice is not against the law and this is a commercial forum, as I mentioned homework and research and take recommendations with a grain of salt.
     
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  18. Connor

    Connor Well-Known Member

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    Of course...there's no way to prevent poor advice being given as there is no way prevent people taking it.

    I totally agree, when people are playing with their life savings and borrowed money they really need learn to do their own homework, rather than trust a sales agent flogging a particular package.
     
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  19. kamchatsky

    kamchatsky Well-Known Member

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    Rather than saying people being burnt from brand new/OTP/H&L packages, what about just saying that people being burnt from not doing their due diligence? Wouldn't that be more accurate? Surely people buying existing properties can still be burnt if they don't do their DD?

    I am sure a lot of people in Sydney have made a motza from all those new properties.
     
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  20. MsAli

    MsAli Well-Known Member Premium Member

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    I agree. Though not everybody is aware there is a lot of good info out there like on Somersoft/Property Chat and the books.

    Most people only learnt after being burnt - it's ok mistakes teach us. Though it becomes much harder to recover from it as well at the same time unfortunately