Seekology

What I found funny about this whole thing was buyer's agents going nuts everywhere telling people not to deal with them. Whether it's because they are scared that they may lose business or have their clients' best interest at heart, I dont know but I do agree that they can't be truly independent.

I thought of this business model around 3 years ago but it was too complicated and not profitable enough. It's actually quite common in the US where buyer and selling agent split commissions but it works well there because of high commission rate (up to 6%). But here with an average of 2% commission, I would only get 0.25-0.5% for a lot of running around...and that's if the agent agrees to split the commission. In a hot market they are unwilling to do so which means there will be a lot of properties these guys will have to pass on that could be good for the client because they wont be getting paid. Best to stick to a normal buyer's agent.

 

Most people on the forums here have a pretty dim view of slick OTP spruikers trying to pass themselves off as legit sales/buyers agents. If it looks like a duck and quacks like a duck...

Real BA's hold their clients needs paramount above all else and arent just interested in flogging them whatever makes them (and their developer mates) money as fast as possible.

 

All of the offers that OTP developers have tabled to me have been @ 5% for the leads which led to sales. The developer builds and staffs the display centre.

You must be dealing with the wrong developers

 

I was referring to the standard 2% real estate agents get. In Sydney it's rare for a developer to offer 5% because of the demand here. Maybe they were trying to get presales for finance approval. I usually work on a 2-3% comm here.

 

Dave a bit strange that you dont like developers yet at the same time you find them land to develop, which they end up building on and selling and then you complain about them. Maybe you should stop helping them.

If you mean spruiker in the sense that they are trying to sell things to people then you will also be considered one because youre trying to spruik your buyers agent service. If you mean they are dishonest salesmen because they get paid by the seller then going by that logic mortgage brokers are also spruikes because they get paid by the bank and people shouldnt trust them. But the reality is that there is good and bad in every industry so you cant use a blanket approach to everyone and everything. Ive also heard and read many stories of buyers agents buying properties over market value for their clients just so they get their commission from the buyer. But this doesnt mean youre also one if them.

With OTP it's the same thing. It's simply another buying or investment strategy. For some people it works and for others it doesnt. I know many people who've made good money with OTP and people who've lost money. I also know people who've made good money with established properties and renos and people who've lost money. They all have their own advantages and disadvantages.

 

And one more thing. OTP sales are an essential part of bringing more properties on to the market. OPT sales are mainly due to banks and their lending requirements and not developers. If banks were prepared to lend with no presales targets then OTP sales will drop dramatically as most people will buy once it's complete.

If people were to stop buying OTP now then it will have a dramatic effect on the construction industry and society in general due to lack of supply and increased prices. With the current population growth, you cant force them to live in other people's homes All these new properties coming on to the market despite their higher prices compared to established properties are actually keeping property prices affordable. Not many people think of that.

 

The concept of OTP properties themselves is not necessarily the issue being discussed... it is moreso the concern over inflated sales prices to the end purchaser that can happen when a middleman acts in between the developer and the purchaser.

 

I am not sure how not liking OTP spruikers = not liking developers. Two very different things. OTP is fine if its a genuine deal that's genuinely the best on market. Its when its just selling their own stock that real BA's have an issue.

You are a seller of OTP properties from your introduction thread. Take your website with its OTP offers and the usual rental guarantees (from a $20 share capital company), free property management, free this free that... all paid for by the purchaser in the purchase price anyway. If someone came to you wanting to invest, would you genuinely say "no dont buy the stock I am selling go buy someone elses as its a better deal for you as an investor". If so great! If not then thats why many get dubious about people who extoll the virtues of OTP regardless of its fit into a clients requirements.

This thread is about OTP spruikers who pretend to be BA's when all they are doing is selling properties under a loose guise of helping people invest.

 

The way real estate is sold in USA and Australia is vastly different. The listing broker puts it up on multi list site and than any Dick and Harry agent can sell it. In essence the selling agent is a BA. Thats why the listing agent does open homes for other agents. In Australia most real estate is sold exclusively by one agency.
What this BA system where you don't pay does is fundamentally wrong. You can not get commission from the seller if you are representing the buyer.
Mortgage brokers get paid by a bank regardless which bank they use. They are finding you the best deal and will get paid regardless which lending institution they use. If they start taking people for a ride they will not be in business for long.

 

I can not imagine many agents would be sharing their commission with these BAs. On the other hand developers will appreciate any new selling channels.

 

There is a middleman in every single industry. How often do people buy things directly from a manufacturer? Although commissions are a bit lower in Sydney but even if we say that developers pay 5% commission, that's still only 25k on a 500k property. You cant say inflated prices because of a 5% commission.

I was just explaining to someone that OTP will always be more expensive than established properties. This is because the cost of land, labour and materials would have gone up and you cant build a property for the same price as something that was built a few years ago. And this is normal for all new vs old products in any industry. Developer margins also contribute to the higher price as no one builds for fun and zero profit.

How you can find out whether an OTP property is overpriced or simply being sold at its market value, which could be higher than an existing property, is to look at the price gap. The smaller the price gap the better. If 2bed OTP is being sold for 500k while an existing property is selling for 350k then you should think twice. But if the price gap is under 50k for 500k property then you should strongly consider it as youre getting a new property for prices not much different from an older one. Especially as a first home buyer who will be getting 25k+ in govt benefits. That's how you find yourself good OTP deals. Of course you also need to take in to consideration the potential growth of the area, livability, rentability etc.

 

If the BA is recommending their own stock when the client needs something else then yeah there is a conflict of interest. Not legally but at least ethically. But if they work on a broker model then I dont see anything wrong with it.

With my business model, I identify areas with good potential growth and then find good properties to sell. Ive also incorporatd the BA model where i find properties for clients as per their criteria if i dont already have it (developments only). I rarely do exclusives so this helps me remain impartial. The only exclusive I took on was last week which were some townhouses in the Newcastle area. I only did it because the developer is a decent guy, location is good, his product is very good and prices are also very reasonable. He tried selling them himself but he didnt know how to as he's not a salesperson so I decided to help him out.

 

You said spruikers and their developer mates. Meaning they are all in to together and all the same.

With the rental guarantees you are partially correct. They can be built in to the purchase price if the property is located in an over supplied area with high vacancy rates. The developer knows that there is a good chance the property wont rent for a while so they will offer rental guarantees built in to the price.

With the one I have on the website it's an area with very low vacancy rates. The developer knows the property will rent out quickly so they are only offering it as a clever marketing strategy to sweeten the deal. There is nothing extra built in to the price. I wouldnt sell it if wasnt a good deal. This is where experience and knowledge of OTP properties really help to separate a good deal from a bad one. Other than that I'm with you on rental guarantees.

With regards to telling them to go to someone else for an OTP property, I dont usually need to do that as I can source the stock for them. But if a client wants existing property and I cant help or if I know OTP is not good for them then absolutely I would send them to someone else. In fact a couple of hours ago someone inboxed me here and asked about buying an OTP property in a certain area and I told him dont and buy established instead because its 100k-150k cheaper. But if he wants OTP then buy in another area I recommended where price gap is very low and better potential for growth.

 

You aren't getting it... this thread is specifically about spruikers selling OTP only from selected developers they are in bed with under the guise of being neutral and working for the purchaser as buyers agents.

You cant twist my words to suggest that I am saying that every developer who sells off the plan is dodgy, or that everybody associated with a developer is dodgy, as that is not what I am saying.

On a side note, glad to see you would do the right thing by a client, its what generally sets a spruiker and real estate professional apart.

 

My apologies for misunderstanding you.

Thanks mate. Reputation is everything in this industry and the easiest way to protect it is to do the right thing.