Caveat Emptor suggestion

[Mike]

Hi Folks,

The Somersoft forum is a great place for talking about property and investing issues which should naturally lead to a property purchase occasionally. I know many of you like to source property deals yourself so you are probably not going to be interested in any deals posted on Caveat Emptor.

In my case, I don't care where the deal comes from as long as it is a good deal. Therefore, I'd like to see the Caveat Emptor forum utelised much more and to that end have a suggestion for you to consider.

With your approval I'd like to approach as many buyers agents around the country as possible and ask them to post potential investment property deals on the CE forum. The types of properties I'm suggesting are ones with development potential. They could even be large deals offering opportunities to joint venture with other forum members.

I think this would work well since buyers agents have very good local knowledge and can provide us with unbiased information about a deal since they are not acting for the vendor.

Please let me know what you think of this idea and what sort of deals you think we should source.

I've also added a poll to this post.

Regards, Mike

 

[XBenX]

I like the idea - but I can see the forum being abused and a tough time ahead for the mods !

Perhaps - you could have a standard form that they need to fill in and a mod has to approve it before it is posted (i think there is this function)

 

[Aikido]

I think the idea is great, but I have to agree with xbenx (just this once)

Setting a group of criterias would give forum members some reassurance about the deal, though it shouldn't stop them from doing thier own DD.

I would love to see more deals on here that I can take advantage of.

 

[asy]

Quick question Mike,

Are you deliniating between buyers agents, and regular Estate Agents...

Is the poll asking only about buyers agents? or Estate agents in general?

asy

 

[brains]

Sounds like a good idea Mike. You could include any deals from anyone that might be attractive to all investors and not just investors interested in development.

And the posts could be in a format similar to the post from Singing Pig (straight fact) and possibly not in a format similar to the one from Kevin Hockey (real estate spiel).

Id say it would be hard to keep track of but you could give it a one month trial period.

 

[Jamie]

Originally posted by brains

And the posts could be in a format similar to the post from Singing Pig (straight fact) and possibly not in a format similar to the one from Kevin Hockey (real estate spiel).

Did it occur to you that the post from Lisa Orme on Singing Pig was simply "fact" because it was a deal she had merely noticed, rather than one she was trying to sell? She had noticed a deal and was telling other forum members about it.

Dont you think if she was an agent trying to achieve the highest possible price for a vendor, the post may have contained more superlatives than it did? If you were selling your own home FSBO, can you honestly say your desciption of it would not be more colourful than if I had simply driven past and was describing it to strangers?

Im not saying one way is better than the other, but I think you can't compare the content of each post without comparing the context.

Jamie

PS Quick question for Brains: Do you ever get a sore back from carrying around such an enormous grudge?

Sorry to get off topic Mike, I think your idea is a good one and would be happy to have it as part of the forum

 

[Peter_Tersteeg]

The main problem is that most of the deals posted already get torn to pieces, usually because they're not good deals in the eyes of the members here, often because not enough information is supplied.

When posting a new thread (new deal), rather than an open message box, have a form which the deal poster must fill out. None of the fields would need to be manditory, but it could give the person writting the post some guidance as to what the members want to know. Replies to the deal/thread would reply via the standard form.

 

[Mike]

Is the poll asking only about buyers agents? or Estate agents in general? - Asy

Hi Asy,

Yes, the poll is specifically referring to buyers agents. I don't recall a buyers agent ever posting a deal on CE so we may have to be proactive and invite them to do so.

Of course, CE is still open to anyone to post a deal, including sellers agents.

I don't wish to turn CE into purely an advertising board. Any deal should promote discussion. However, I do think CE could be a place to source property if the deals were good.

Some people have mentioned utelising a standard form to get the minimum information required to consider the deal seriously. I like that idea but need suggestions what to include.

Regards, Mike

 

[Kevin Hockey]

In my opinion, if they do post they'll only post once and learn not to make that mistake again!

Sounds great in theory, but buyers agents don't carry listings as far as I know, they work for buyers. You could turn the forum into a private sale website if you want to.

Kev

www.nundahrealestate.com.au

 

[geoffw]

Originally posted by Kevin Hockey
In my opinion, if they do post they'll only post once and learn not to make that mistake again!

Kevin,

Please, do post deals again!

The consensus was (as I understand), that the posting of a deal was not wrong. But, as a part of a community which is still trying to establish precedents, the next lot of deals could be posted differently.

And also be prepared to answer questions.

Kevin, you did that brilliantly.

Please post. Any other agents, also post.

But if you do post, be prepared for questions, and answer them quickly. You've done that. Others have not.

I suspect too that there's more people in here who are more interested in cashflow than cap growth (but I could be worng on that). Judging by some questions, if there are some good cashflow opportunities, there may be some interest.

HOWEVER, I would also suspect that many people here would not be interested in a new property with a rent guarantee (and epecially not with a free flight). Positive cashflow would have to be either from:
. low purchase price
. reno potentail
. above average rent

(plus other ideas).

Personally, I like growth which does not cost me much

 

[bundy1964]

Hi

Correct me if I am wrong

But don't buyers agents work for the purchaser and are given a list of features the buyer is interested in for which they charge a commision on the final price?

Would they be interested in posting deals at abc location listed with def agent for $xyz if they missed out on their share of the $'s?

bundy

 

[Mike]

Hi,

Have put together a list of property details that could be expected to be considered in a property buying decision. Have I missed anything?

Some people have asked how much of this info should be supplied by the poster initially and how much should be researched by the investor. I feel that more interest in the deal would be created by the poster submitting more information initially. The longer it takes us to do the required due diligence the longer it will take to arrive at a buying decision. If the vendor is in a hurry to sell or the agent is anxious to complete the deal quickly then they can speed up the buying decision process by supplying as much due diligence info up front.

About the market

Stage of property cycle
Vacancy rates
Interest rates

About the property

Type of property
Construction materials
Age
Current use
Zoning
Building dimensions
Ceiling height
Room size
Land size
Land to building ratio
Council rates
Building condition
Low or high maintenance
Motivated vendor (if known)
Curb appeal
Current rent
Current rental demand
Current lease
Record of vacancies
Rental yield
Expected rent
Expected sale price
Historical growth
Expected growth

Development potential:
add a family room; add a bedroom; add an ensuite bathroom to the main bedroom; add offstreet parking or a lock-up garage; increase the storage; extend upwards or out into the backyard; build under; turn one dwelling into two flats; add a dwelling in the backyard; fix an architectural problem - aluminium windows, or restore period authenticity.

Special features eg insulation, lockup garage, ensuite bathroom, large deck, verandah, pool, security, privacy, skylight, sunroom, BBQ area, views
Negative features eg traffic noise, under flight path, in flood zone, proximity to potential bushfire
Distance to shops
Distance to train station
Distance to schools
Best house in worst street or worst house in best street
Depreciation schedule
Sales comparisons
Replacement value
Scarcity value
Character

About the area

Distance from CBD: 5-10km preferred for maximum borrowing
Demographics
Average wage earnings
Population
Expected population growth
Renter profile
Employment
Public transport
Shopping
Road access
Schools (if applicable)
Crime rate
Median house price
Median rent
Historical growth
Projected growth
Building activity
Council infrastructure upgrades
Amenities
Negative features eg high public housing density, nuclear power station

Extras

Photos: street frontage, view, backyard
Floor/site plan
Location Map

 

[XBenX]

that would be awesome - but i dont think anyone could be bothered posting all that ! even if there was a nice big fat commission

it certainly is a good list and even if they only filled out a few fields it would be better than the info we get now

 

[Kevmeister]

Mike - the idea is OK but I concur with the comments made about the role of buyers agents, which kinds of makes the idea of buyers agents posting deals kind of moot, doesn't it?

Agree with XBenX (I made similar comments at end of Kevin Hockey's recent CE thread).

Perhaps for most agents it's too much like hard work posting that amount of info. Why bother if you can whack a 3-line ad with a picture in the local paper and get some mug to buy it above market price?

Several members on this forum have stated there is no perfect property. CE only seems to amplify that fact.

Also, it's OK to state facts, but what about when certain "facts" are omitted? Like 1 km to station, 0.6 km to school. Oops - didn't tell you about the 0.4 km to the stinky chemical factory because I wouldn't be able to sell then, would I?

Only an uninterested party would likely ever make those kind of factual obligations, anyway. That doesn't reduce the merit of what is provided, but my point is that no amount of facts will replace due diligence and, if anything, it might lull some into a false sense of security?

Sellers are interested in selling. Jamie makes a good point about different individuals having different roles, different motiviations, and different objectives, and they are going to approach CE differently.

Mike, the type of information you've said would be good should be part of the CE guidelines for anyone to read. That way they'll know what's [preferably] expected of them. How many real estate agents suggest a property might be suitable for development STCA - do they really know? Or it is just another potential selling point.

 

[Mike]

Also, it's OK to state facts, but what about when certain "facts" are omitted? Like 1 km to station, 0.6 km to school. Oops - didn't tell you about the 0.4 km to the stinky chemical factory because I wouldn't be able to sell then, would I? Kevin

Hi Kevin,

REAs have a duty to disclose this if they know it will impact on the sale or purchase of the property. Ignorance is no excuse. This is why a buyer should ask the REA to disclose anything they know which might influence the buying decision including negative points about the area. If the agent doesn't disclose they can be easily sued later.

I would expect REAs to know about flood zones, bushfire threat, nearby chemical factories, power substations, power pylons, microwave transmitters, nuclear reactors, high crime rate, overhead flight paths. Afterall, they are meant to have superior local knowledge, aren't they?

From the Property Dealers and Motor Dealers Act 2000:

A REA must act in a client's best interests unless it is unlawful or unreasonable to do so.

A REA must act honestly, fairly, and professionally in the conduct of a real estate agency.

A REA must treat a customer honestly and fairly.

A REA must take reasonable steps to find out or verify the facts material to the sale or purchase that a prudent REA would have found out or verified to avoid error, omission, exaggeration or misrepresentation.

Quote from Fair and Square - A Guide to the Trade Practices Act for the Real Estate Industry found on REIA website.

For REAs silence is not golden - on the contrary, you should be open and frank with clients and customers. By remaining silent where you have a duty to disclose something of concern to a client or a potential buyer, you risk breaking the law.

Giving only half the story can also be deceptive. Agents have to take responsibility for what they do and say. You cannot regard yourself solely as a channel for information between the seller and the buyer.

Another duty the REA has to the client is to "... obtain the maximum sale price for a client's property."

To my thinking that can only be achieved if there is maximum interest by people who can make a buying decision. How can you make a buying decision without the necessary facts?

Quote - "In 2001, the typical homebuyer took seven weeks to search for a home, down from seven weeks in 1999. (Source: 2000 National Association of REALTORS® Profile of Home Buyers and Sellers)."

I don't understand why REAs don't provide all the facts that will influence the buying decision up front to maximise the amount of interest and competition which would logically lead to the maximum price for the vendor. In addition, it would reduce the time it takes for the buyer to find and purchase the property. REAs must understand that interstate and overseas buyers will necessarily take longer than a local person to complete their due diligence and arrive at a buying decision. To disregard this is exerting undue pressure on them to make a buying decision before all the facts are considered. In otherwords, forcing them to buy hurriedly on emotion which is the typical sales strategy.

As far as Caveat Emptor guidelines are concerned, point 6 explains that full disclosure is required otherwise the post will be seen as nothing more than blatant advertising rather than the presentation of a deal which is the purpose of CE.

6. Ensure your post has sufficient information to justify why a property investor should consider it. Comparative information, extensive demographic detail, financial details, etc. are a MINIMUM if you want your post to be taken seriously.

Lastly, Kevin, what is STCA?

Regards, Mike

 

[asy]

hiya Mike...

STCA is Subject To Council Approval... It's the standard disclaimer for agents when we say, hey, I think you could put 5 units on here... (STCA)

Also, don't forget the PAMD (property and motor dealers act) is QLD only. The other states all have very similar legislation, though...

asy

 

[Perp]

I'd rather see a much smaller form with a few mandatory fields, such as:

* suburb/town
* asking price, or anticipated sales price (if auction/tender)
* type - house/unit/retirement unit/land/development site etc
* primary profit angle - renovate and flip, cashflow positive holding opportunity, development, instant equity by buying below market, area tipped to boom, etc

I think many of the remaining fields on the form constitute due diligence that should be performed by the prospective purchaser. If the person feels that there are some great aspects of the property, eg in an area targeted for urban renewal, then they can say so in narrative.

 

[eKwatee]

I'm in real estate sales and enjoy reading the forum for my own learning and knowledge growth but also contributing to help others where needed. I list and sell lots of properties without feeling the urge to post in this section. However since being a member here there has been only 2 occasions where, if the information had been posted in this section it would have been a benefit to other members.

I would suggest if a RE Agent or Consultant thought they had a really good opportunity for the members, that they could post the details with their reasoning as to why they thought it would be a good opportunity excluding any address or hyperlink to realestate.com.au, domain.com.au or any other website etc. until they have proved to the other members and satisfied to them it is a good deal. Confirmation to the Agent or Consultant as to the members agreeing to the deal being a good one could be a member or one of the mods asking for the address or the link.

I think this way would cause a positive reaction to each and every thread as to what the Caveat Emptor section was intended for. Questions, Answers, investors thoughts, reasoning, opinions and generally talking about what makes a good investment.

 

[INVSTOR]

I've often wondered if there is any sale success with people mentioning a property on Caveat Emptor?

 

[Buyers Agents]

I'm just trying to figure out what the outcome of this discussion was. Is there any problem posting deals in the Caveat Emptor section?

A good deal for one person may not be good for another, surely it all depends on what your "buying criteria" is whether you consider it a deal or not.

I've been a finder for the past four years in NZ and am interested in posting Kiwi deals here, but I sure don't want to be dodging bullets!

What's the go?

____________________
Vicky Harris
Buy positive cashflow in New Zealand http://www.buyersagents.co.nz
No Stamp Duty : No Capital Gains Tax