Agency falls foul over rental income guarantees

By Phil McCarroll | 13 Jan 2016
A Western Australian based real estate agency has fallen on the wrong side of the state’s Department of Commerce in relation to advertisements it made about properties for sale.

Macro Realty Pty Ltd and its directors, Desiree Veronica MacPherson and Renee June Smith, have agreed to enter into an enforceable undertaking after WA Consumer Protection found rental income guarantees contained in the advertising of properties for sale in the regional town of Newman were unsubstantiated.

According to Consumer Protection, between May 2015 and September 2015 Macro Realty Pty Ltd advertised properties for sale in the Newman Estate with a guarantee that each property could be leased for 12 months at a particular rate of rent.

The enforceable undertaking requires Macro Realty Pty Ltd to remove all advertising claiming properties will generate a particular rate of return and not make similar claims in the future.

“To give a guarantee of a certain rate of rental income to a prospective buyer of a property, an agent must have reasonable grounds on which to make that prediction,” Consumer Protection acting commissioner David Hillyard said.

“The purchase of a property is a substantial investment for most people, so their decision as to which property to buy must be based on true and accurate information provided by the owner or their agent,” Hillyard said.

”Guarantees can be based on the actual rental income that the property attracted  within a recent period of time, but must also make a reasonable prediction of future income based on current market trends.”

For Rich Harvey, president of the Real Estate Buyers Agent Association of Australia (REBAA), claims such as the ones made by Macro Realty Pty Ltd should give investors reason to pause.

“I see things like that as just a marketing ploy to try and get investors to buy into properties,” Harvey said.

“Some people will look at claims like that and think it removes the risk of investing. Really what people need to do is to look into the property themselves and see if it stands up on its own,” he said.

Harvey said those anybody investing should take an in-depth look at what’s happening in the area.

“You really do need to do your due diligence. You need to have a close look at the area and find out what renters want and how much they’re willing to pay for it.

“In particular, vacancy rates are definitely something that people should be looking at before they invest in an area.”

While Harvey said it’s important investors do their own research when looking to buy a property, he also said investors should make sure they’re working with reputable operators.

“I would definitely recommend investors work with agencies that are accredited by REBAA.

“REBAA members are bound by a strict code of conduct and very conscious of being 100% transparent and doing things that are in the best interests of buyers.

“One of the first things I would recommend to people if they’re looking at an area is to go to the REBAA website and find an accredited agent in that area.”

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