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Cutting corners, conflicts of interest and concerning trends emerging; buyers agents are putting buyers at risk

With COVID making many businesses look for ways to pivot and still provide services in the new world of border closures and travel bans, the property buying business is under the microscope.

Many property investment firms and buyers’ agents sell their services on the basis that they can help investors buy property across the country.

Pre-COVID they would jump on a plane and travel to the locations they were buying in, inspect properties on behalf of their clients and make buying recommendations from there.

According to property commentator, valuer and Suburbanite Principal, Anna Porter, the selling point was having access to and knowledge of property in locations most buyers just can’t get to or don’t know about.

“Now that COVID has dominated 2020, and border closures and air travel are a thing of the past, a concerning trend has been revealed in this sector,” Porter says.

“Property buying firms are in many cases NOT inspecting the property and relying on a video or photos from the selling agent to make buying decisions for the purchaser,”

“This is a significant conflict of interest and in many cases, not disclosed to the purchaser – generally, the purchaser is under the impression that the buyer’s agent they have engaged and are paying a healthy fee to have inspected the property on their behalf.”

Porter urges that now more than ever, buyers need to beware!

She reflects on her own experience and explains she would never purchase a property that she has not inspected or had an ‘independent’ professional inspect on her behalf.

“If I won’t do it, I would never let my clients do it,” says Porter.

“I have seen too many times what can go wrong with ‘buying off the internet’ and relying on information from the selling agent.”

More concerning is when property firms have an agent, or friend (usually with no property expertise or licensing) inspect for them, and they are paid IF the property is purchased as a success commission.

Through Anna Porter’s experience, she sees this as a way to incentivise the agent or representative to recommend or push bad properties to investors for all the wrong reasons.

This practise will result in buyers getting properties that are not what they seem, and pay money for expert advice that they are not getting.

Anna Porter shares what buyers and investors should ask before engaging a property buying firm;

  1. Who will be inspecting the property and what formal qualifications do they have
  2. Do they hold a real estate license in the relevant state?
  3. Are they at all linked to the sale of the property (the selling agent is to act in the best interest of the seller, NOT the buyer) and should not be relied upon for the buyer’s due diligence such as inspections and so forth
  4. Is the representative paid or incentivised by the property being purchased, as opposed to being paid a salary or per inspection irrelevant of if the property is purchased or rejected?
  5. What is the inspector’s liability if something is missed?
  6. What is the inspector’s property experience in that market and how long have they worked there?

“When our valuers and advisors inspect 20 properties for our clients, ones that have already been reviewed online, vetted and researched thoroughly, we will generally reject 17 of them entirely because they did not meet our strict investment criteria,” shares Porter.

“So, we have a rejection rate of 85% on inspection by our qualified property professionals,”

“It significantly concerns me when we see other buyer’s agents’ not inspecting at all, using the agent to inspect for them or buying most of the properties they look at for their clients.”

Anna believes we’re left to wonder what their barriers to entry are.

She says buying property needs to be the ‘John West’ approach, it’s not what we buy you that you will thank us for, it’s what we don’t buy you that you will really thank us for.