Buying investment property can be a great way of building wealth. But it can also end up being a very expensive mistake – especially when there’s an ethically challenged property spruiker involved.
What’s a spruiker?
According to the Australian Competition and Consumer Commission, a spruiker is someone who is “motivated to gain money at your expense”.
Spruikers do this by marketing themselves as property investment experts, commonly inviting you to attend a free “wealth creation seminar” or training session. During this session, they’ll offer you a hot property deal that comes with spectacular returns – then use hard-sell tactics including cashback offers and rental guarantees to convince you to sign up on the spot.
However, the reality is that these hot deals are usually substandard properties that are being sold at an inflated cost. And if that’s not bad enough, the spruiker is being paid a big commission to sell it to you – which has already been factored into your ‘discounted’ purchase price.
The Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) issued a warning about property spruikers. In it they said:
“It’s quite common for developers to offer commissions of $50,000 or more as well as gold Rolexes for help to offload subpar stock.”
What about buyer’s agents?
Don’t confuse an honest buyer’s agent with a property spruiker, as they are two very different things. Buyer’s agents can be a wonderful source of advice when you’re an investor. They don’t have a vested interest in selling you a particular property, and, instead, work with you to research and identify quality property that suits your needs and goals.
Unfortunately, anyone can call themselves a property investment expert – so how do you tell the difference between a con-artist and a professional?
The differences between a spruiker and a buyer’s agent
- Spruikers have a ‘one-size-fits-all’ approach whereas a buyer’s agent will tailor their advice to your individual financial circumstances, needs and goals.
- Spruikers want you to use their mortgage broking, conveyancing, settlement and tax advice services – as it inflates their commissions, and means you won’t get independent advice. Buyer’s agents may recommend other professionals but are happy for you to find your own.
- Spruikers use high-pressure sales tactics to get you to sign up to a deal straight away. A good buyer’s agent will never put pressure on you.
- Spruikers are only interested in selling you one particular property. But a buyer’s agent will look across the market for you.
The consequences of choosing the wrong one
As PICA explains, property spruikers only think “about their own bank balances and not the long-term financial consequences on consumers of their under-handed actions.”
And unfortunately, these consequences can be dire, including costing clients hundreds of thousands of dollars.
That’s because when you invest with a spruiker, you’re generally paying more than a property’s worth. So when it’s time to sell, you may not get back what you paid for it – potentially leaving you in debt.