11 tips to protect yourself from real estate scams
Sunday, March 8, 2015/
Real estate investment seminars are in the spotlight again with the competition watchdog instituting proceedings against property training company We Buy Houses and best-selling author Rick Otton.
The Australian Competition and Consumer Commission (ACCC) has repeatedly warned consumers to be cautious about real estate investment seminars in general. It urges people who have been scammed or come into contact with a seminar or real estate investment that “doesn’t seem right” to report it to the ACCC through the SCAMwatch website.
In the latest case, the ACCC alleges We Buy Houses and Otton contravened the Australian Consumer Law by making misleading claims in promoting property investment seminars and training programs at costs ranging from $2997 to about $17,000.
Otton, who wrote the popular book How to Buy a House for a Dollar, says the ACCC is taking a literal interpretation of the book’s title while members of the public would understand that the dollar was just the start of the process.
But the ACCC is concerned the seminars target vulnerable consumers who don’t qualify for bank loans or who are having difficulties meeting their mortgage repayments.
Warnings of potential real estate scams for would-be investors
The latest action follows an investigation with New South Wales Fair Trading. We Buy Houses and Otton have previously been under scrutiny in other states with Victorian consumers warned about the seminars in 2012 and Otton being banned from conducting seminars in Western Australia in 2013.
The ACCC frequently warns would-be investors that many consumers have paid thousands of dollars to a wide range of property investment seminar promoters to receive advice. In many cases the strategies presented have been high-risk, involving borrowing excessive sums or borrowing on risky terms, and inappropriate for the investor.
In some instances, people with self-managed superannuation funds have been specifically targeted, although proposals to ban SMSFs from borrowing may curb that.
Some investment seminar promoters use high pressure tactics to coerce people into making investments without independent advice. Some charge unexpected fees and commissions or make false or misleading promises about rent guarantees or discounts for buying off the plan.
Here’s a list of tips compiled from the ACCC’s ScamWatch website and the Australian Securities and Investments Commission’s (ASIC) MoneySmart website on how consumers can protect themselves from losing money as a result of advice from a property investment seminar:
- Use your common sense: the offer may be a scam.
- Remember there are no get-rich-quick schemes: the only people who make money are the scammers.
- Be wary of investments promising a high return with little or no risk. No investment is risk-free. If it looks too good to be true—it probably is.
- Look carefully at the strategies suggested by the seminar to achieve these results. Property typically returns 6-7% a year, year after year. If you’re offered returns of 1-2% more than the typically return, get a second opinion and ask for a detailed written explanation.
- Watch out for property deals that include ‘rent guarantees’ or ‘discounts’ for buying off the plan. They can involve hidden fees and commissions. The properties can also be over-valued.
- If you are planning to make an investment, consider other costs that may be involved such as legal fees and stamp duty.
- Do not let anyone pressure you into making decisions about money or investments. Do not commit to any investment at a seminar where the atmosphere can be charged and exciting. Investment decisions should only be made after a lot of thinking and after seeking independent advice.
- Remember that family members and friends may try to involve you in a scam without realising that it is a scam: you should seek independent advice (from a lawyer or financial adviser).
- Do not open suspicious or unsolicited emails (spam): delete them. Do not reply to a spam email even to unsubscribe.
- Check with ASIC and the ACCC to see if they have taken any action against seminar promoters or their schemes. Remember that even if ASIC or the ACCC have not taken any action to date, this does not mean the scheme is safe or legal.
- Before you accept an offer to fly interstate to view properties, find out if you must pay for your travel and accommodation if you don’t buy.
- Another twist is to get you to invest in offshore schemes where you lose the protection of Australian laws. You may never see your money again.
Source: ACCC, ASIC.
This story originally appeared on Property Observer.