Property Marketing Companies (AKA Property Spruikers) The Good, The Bad and the Downright Slimy

Posted on: 13 Feb 2020

As I got in the lift and pushed the button for the ground floor, I took one more look at the office I had just walked out of. It was on the 21st floor of a very sophisticated tower in the heart of the Sydney CBD. The office resembled something out of Forbes magazine, shiny leather recliners in the reception, the quintessential glass coffee table with polished sliver legs, topped with copies of the latest property investment magazines, neatly arranged of course. It had amazing views out towards the Opera House and Sydney Harbour Bridge, marbled tiled floors, dark oak desks with leather inlays; the whole place just felt luxurious. I was, at that time, new to the property industry and this was my first meeting with a marketing company who secured apartment complexes for other property companies to sell. As I walked in to meet with the sales rep, I looked around and thought, “this company must be doing really well”. Let me tell you, I walked out thinking, “I need a shower to get all this slime off me”! No one likes to be sold to with the pushy and slick moves these guys used.

That was my first encounter with a Property Marketing company and their associated property spruikers, and it left me astonished at how much it was all about them, not me, the customer. This company was at the top of the food chain and supplied properties to some of the bigger names in the market. It was all about how many properties they sell a week, that they could sell out an entire 120 apartment complex in 3 days and how much they got paid. Brag after brag after brag.

From that day forward, I began to learn that there are many different types of Property Marketing companies out there, some put their clients first, others pretend to and the worst ones, think that they put clients first but actually have no idea what they are doing. In my experience, there are a few different types of Property Marketing companies and here is my take on how to spot them, what to watch out for and the right questions to ask. This is by no means an exhaustive guide to property investment, but it is a great start.

Off the Plan

These companies predominantly sell off the plan units and townhouses, usually with long lead times of around 12 – 36 months. The company gets paid by the developer to sell their properties and in some cases, commissions can be quite high.

What to watch out for and what to ask

  • If clients try to negotiate on the price and they drop it on the first ask, then maybe it was already overpriced
  • If they run a seminar, don’t impulse buy on the night, no matter how good the deal seems
  • Market and lending fluctuations are important. If a client has a $700,000 budget and they get sold a $700,000 property that isn’t going to be completed for 1-3 years, are they going to be able to get the loan if interest rates go up, the market changes or their circumstances change? Never max out your budget
  • How many properties are in the complex/block of units? How many have they sold to investors? You shouldn’t want your client to be one of 100 investors in the same complex. A handy tip is that developers who sell only through marketing companies, won’t be advertising on realestate.com.au as they don’t have in-house sales teams. If you can’t find it online then it’s most likely being sold by a Property Marketing company and you can safely assume, mostly to investors
  • Ask to see valuations. Ask for comparative sales in the market (I’m talking ‘’sold” sales not “for sale” properties here folks). If a company sells you on the future value of the property and the current value doesn’t stack up, then your clients may be in for a shock come settlement date
  • Watch out for proposed infrastructure spending versus real intent to build. I’ve seen companies selling plans with proposed train lines with no timeline or date and in lots of cases, this infrastructure never happens

All-Inclusive Services

These are the companies that offer, property advice, financial planning, accounting, mortgage brokering, tax assistance, depreciation reports, conveyancing, and even child-minding services. Again, these companies are set up much like the above “off the plan” companies but will also focus on new house or house and land packages. The same questions as above apply but I have questions about this model too. If everyone in the business is working for each other and are all on the same page, then the client may enjoy a seamless service, however… the question here is, who is going to be the person that will put their hand up and say, “I don’t think this is in the best interest of the client”? Maybe the borrowing is being maxed out with no buffer, the contracts don’t get negotiated as hard because they don’t want to lose the sale etc… I’m not saying this is a good or bad model but there are just questions that need to be asked and understood before you engage with this type of company.

Buyers Agencies

This is a “client pays” model and these agencies can help secure off the plan as well as new and existing properties on the market. The buyer is purchasing the services of the buyer’s agent to research, locate, negotiate and close the purchase for their client. Usually, the agents will charge a set fee (usually around 2-3% of the purchase price) and in most cases will be able to negotiate this amount off the listed price, meaning the client overall isn’t out of pocket.

A few things to be aware of:

  • If they are helping you buy a brand-new property, ensure they are not double-dipping and getting paid by the developer too. Let me be clear, this is an illegal practise
  • Ask about the fee structure and how it has to be paid
  • Don’t pay too much upfront
  • Be very clear about the terms of the engagement, how long, how many properties will they show you, what happens if you don’t buy etc…
  • Remember, your clients are paying for their market expertise so there is no harm in asking why they are recommending this property, suburb, location, especially if using their services for investment purposes
  • If you’re looking in a location where not many properties come on the market, then this service is invaluable and can sometimes access off-market opportunities aka hidden gems

 

Property Marketing Companies

These companies can offer off the plan properties such as units or townhouses, house and land packages and completed new houses. The good ones will put the clients’ needs first and rather than sell you a property, they will understand the clients’ requirements and actively look to provide options and solutions that work in the best interest of that client.

What to watch out for and what to ask

  • This is much the same as the off the plan companies, so you can ask all the same questions
  • If they feel like they are pushing clients into a particular stock or area, ask to see their research and get it independently verified if you can
  • With house and land packages, make sure you do comparisons with the land and build prices
  • Watch out for scare tactics: “If you don’t invest, you’ll die old, alone and penniless” etc
  • Some will try to sell on the tax benefits and how people are paying too much. Ask them how much it costs to hold the property before and after-tax

At the end of the day, as with any industry, there are good ones and the not so good ones. Property Marking Companies and Buyers Agencies have their place and, used effectively, can help clients build multi-million-dollar property portfolios or build/find their dream homes. They can also help to save time, money and avoid costly mistakes. It’s really about asking the right questions upfront, understanding what the client is looking for and the right company to work with and most importantly, doing your own independent research on any properties that might be recommended.

Simon Wilkins, Director of Inspired Property Group, [email protected], www.inspiredpropertyinvesting.com.au

 

 

This article should not be considered legal advice, but as a general guide only. If you are facing legal recovery action, please consult a legal attorney to assist you. For further information on how to have your debts cut by half or more through a specialist negotiator, reach out to us on [email protected], or contact us on 1300 490 030.