Property spruikers and investment seminars
Property spruikers:
- give advice and tips on how to make money by investing in property
- promote properties for sale in a particular development or area.
Get independent financial and legal advice before entering into any contract with a property spruiker.
This is especially important if the contract puts your current home at risk by using the equity to borrow money to invest.
While the Australian Consumer Law (ACL) prohibits misleading, deceptive and unconscionable conduct, you should not rely entirely on a property spruiker’s advice. Many consumers have had to take legal action to try to recover their losses after taking actions following overly simplified advice or relying on the deceptive claims of a spruiker.
For more information and tips about property investment, visit the MoneySmart website.
The invitation
Property spruikers might:
- invite you to a free ‘wealth creation’ seminar
- offer discounts if you sign up on the spot
- offer personal loans or credit to help you pay the enrolment fees for their training course.
Property spruikers often use an initial ‘free’ seminar to try to sell you further seminars or materials. We recommend you do not attend these seminars.
If you do go, you should avoid signing anything until you can do your own research and get independent financial and legal advice from licensed professionals, with their own professional indemnity insurance.
If you attend a seminar where there was no indication goods or services would be sold, you are entitled to a 10 business day cooling-off period for anything you buy over $100.
The hard sell
Property spruikers will often:
- promote a property investment system
- market a particular property development.
Be wary of spruikers who:
- use high pressure sales tactics to try and rush you into making decisions or signing contracts
- avoid answering your questions
- downplay the risks of investing in developments or areas where the investment may not hold its value, such as in areas reliant on seasonal visitation (e.g. tourist spots) or employment levels (e.g. mining towns)
- downplay the costs involved
- push property deals where the spruiker supplies mortgage broking, conveyancing, settlement or tax advice
- claim their method or scheme is ‘government approved’ by frequent reference to the Australian Taxation Office (ATO) or Australian Securities and Investments Commission (ASIC)
- offer only interstate or off-the-plan properties, as it is more difficult for you to do your own independent checks on these types of properties.
Some property spruikers tell personal success stories, claiming profits they have made for themselves and their clients.
Even if proof is provided, remember these profits were specific to the market conditions at that time. Any number of changed market conditions, like the construction of new housing developments or the closure of major local employers, may mean similar rental returns can’t be guaranteed.
Undisclosed commissions
Be mindful of the possibility that a property spruiker is receiving commissions or inducements to solicit business for:
- property developers
- mortgage brokers
- conveyancers
- tax agents
- financial planners and advisers
- finance providers.
This means a property spruiker’s advice may not be independent.
Schemes on offer
Spruikers may promote:
- schemes that involve investing in property using your self-managed superannuation fund
- land banking schemes where blocks of land are offered before the land is approved for development
- high-risk loan options for buyers unable to get a regular bank loan due to their poor credit history or unstable employment record
- rent-to-buy schemes for people unable to get mainstream finance – these are particularly high-risk for buyers as they won’t be on the title of the property until they have purchased the property outright.
Penalties
There are serious penalties for property spruikers who break the law.
We have previously taken enforcement action against property spruikers acting unlawfully.
The maximum penalties for offences that can be committed by property spruikers are:
- False or misleading representations – fines of $220,000 for an individual or $1.1 million for a corporation
- Misleading or deceptive conduct – fines of $220,000 for an individual or $1.1 million for a corporation
- Acting unlicensed as a real estate agent – fines of up to $23,560 or 2 years imprisonment
- False representations about a property – fines of up to $63,612
- Unconscionable conduct – fines of $220,000 for an individual or $1.1 million for a corporation
- Harassment and coercion – fines of $220,000 for an individual or $1.1 million for a corporation