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Did the PAMDA, Queensland Government legislation changes protect the buyers from buying overpriced property or was it a white wash?

In fact the legislation has now been changed to what Mr Bilborough suggested, no maximum commission, and no disclosure of commission and marketing costs. Since that change commissions on average have gone down and Valuers have to now start actually earning their fees rather than just subtracting the marketing costs to stamp out marketeering. Although they still value a home based on where the purchaser may live or who the organisation is that is selling the home. 

Chris Bilborough sat with 2 Different Ministers for Fair Trading and also the Deputy Premier and had 2 Representatives (Peter Morgan and Karl Rameau) on the working party representing the marketing industry and his Company, the working party made the suggestions and looked at what was happening so the laws could be changed, the legislation was supposed to be enacted to stop Investors from paying too much for Property in Queensland.

A lot of other states have no maximum commission that can be charged by Real Estate Agents and none of them make the Agents Disclose there Advertising and marketing fees because they realise the marketing and agents fee has nothing to do with the value of a property. Why is it that Queensland Govt made agents disclose those fees, and how does it stop people from buying an overpriced property, in fact if did not help it all which is why they changed the laws to what Mr Bilborough originally suggested.  

In 2014 this legislation was repealed and now there is no maximum amount of commission that can be charged, and the commission does not have to be disclosed.

Chris' Solution was to force Vendors, who sell developments or Vendors selling more than 3 Properties a year to get a Valuations for Mortgagee Purpose from a valuer that was highly accredited. 

Getting a Valuation may seem extreme but about 95% of properties end up getting valued and this would ensure that people knew what a property was worth before they go through the trouble of going to contract and applying for finance. So the Developer could get a blanket valuation for all of his properties fro sale and the cost of doing the Valuation would only be $$100 per property. They already have to do this in most cases to establish end sale realisation values for them to get development funding, so what is the issue? 

It would also make the developers ensure they are building properties that are valued and needed as well as ensuring the Valuers are responsible for their Valuations as they could be Sued if they were way out on their estimations. It would also force developers to bring the price down to keep buyers happy, that could be from profits or from costs, but it would have to be brought down. This would have the effect of bringing the marketing costs down, between the developers and the marketers or agents as they would have to share in the costs and profits, but the Value would always be there regardless. Chris suggested this through the working party delegates, and to 2 Minister's of Fair Trading, both Judy Spence and Merri Rose, and the Deputy Premier Jim Elder but they chose a different approach, lets look at it.

The Government's solution, which was championed by Iain Herriot, was to put mandatory pages in the contracts forcing the real estate agents to disclose their Agents Fees and all advertising, consultancy and marketing charges. That is correct, he actually argued against getting valuations in favour of disclosing marketing and commission costs, weird. 

Here are some questions to consider-

Does disclosing of fees protects a purchaser, better than a Mortgagee Valuation?

1. How and why does the fee charged by Agents ensure the property is worth what it is being sold for? It is either worth the money or it is not, advertising or marketing does not affect the value of a property, if it does please explain how? You could spend $100,000 on marketing and still sell it under value, or you could spend nothing and sell it $100,000 over the valuation. Please explain how disclosure ensures the purchaser is getting a property worth what it is being sold for and how the purchaser is being protected? 

2. If a developer who sells his own properties and spends $100,000 of his selling price on expensive marketing techniques, why doesn't he have to disclose it and would it ensure the property is worth what it is being sold for even if he did? Many developers now have there own Marketing companies so they disclose nothing, as only agents have to disclose their fees. The property is either valued at one price or another price, where the purchaser comes from or how much money is spent on marketing should be irrelevant. 

3.  A developer can contract a newspaper, TV, tele-marketing companies or any other marketing form he chooses and can spend a fortune on marketing and selling the property, the developer does not have to disclose it were an agent does. A developer could also do this for a Marketer and the Marketer would not know what the costs were and therefore does not have to disclose it. Why is it so important that the agent selling it discloses their fees? Again how does the disclosure of marketing fees establish that a purchaser is not paying more than the property is worth where a Valuation should have been enough, or is it they do not believe the valuations are an accurate measure of what the property is really worth?

4. If a marketer formed a Joint Venture with a developer and owned 10% of the development and therefore received 10% of the sale price, this does not have to be disclosed? Even if it was disclosed how can this ensure that a purchaser is not paying to much for the property? Another point is that a marketer could have 1% of a project yet receive 60% of the profits depending on how the agreement was written, profits do not have to be distributed as per shareholding if the shareholders agree not to for any reason they want to agree on.

5. If a developer on average spends 3% on agents fees and 5% on marketing and advertising and a further 6% on holding costs and 20% on financing costs over 2 years. Why can't they spend 15% on marketing alone to sell the property in 3 months? This would save them 20% on all costs and should bring the price down, and how does this affect the value? Yet under the legislation people may think they are paying to much because the marketing fees were high, yet it is a lower cost than the other method. How does this ensure the purchasers are getting good value, the answer is it does not.

In Chris' book he shows there are many ways on how to beat this legislation and he gives examples of a few developers and Marketing Gurus who get around this legislation and sell over priced properties still. There are not many of them but there are always a couple. The point is that this legislation does not protect consumers and it does not ensure value so why did they do it rather than forcing developers to get valuations like Chris suggested? 

Most developers found Chris a lot cheaper than paying the Real Estate Agents, the advertising, the extra construction costs, the onsite agents costs, the holding costs and the financing costs over a 2 year period, they were significantly cheaper otherwise they would not of used them, it also allowed the properties to be sold cheaper than through the agents.

  1. If developers use telemarketing, TV advertising and Newspaper Advertising methods they do not have to disclose anything under the current legislation. 
  2. Remember the agent can not disclose what they do not know.
  3. The point is this has not stopped one person from paying too much for a property, but what it has done is stop investment in QLD and the Government now offers massive incentives to get the investment back, ridiculous but true.
  4. This has been shown to be now correct, in 2014 the Queensland Government has changed the disclosure laws so that it does not need to be disclosed there is no Maximum commission amount, exactly as Chris Suggested, they only thing they failed to do was to enact the Valuation to show what the Value is.
  5. An interesting turnaround happened because investment in Queensland property slowed and this had two immediate affects. Firstly that Queensland has less people employed, exactly as Deputy Premier predicted and why he asked Chris not to close down his business. It also slowed the Stamp Duty Revenue into Queensland which had devastating effects on the Queensland Budget and Debt levels.
  6. The second major affect was that it produced less homes for rental which caused rents to rise and a Rental crisis in different parts of the State which can clearly be seen in 2015, check in the photo Album. This affected the low income earner more than anyone else, which is who the Government should be protecting.