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A deal that’s too good to be true

AN all-expenses-paid trip and an invitation to look over an investment property sounds like a deal that’s too good to be true.

And, sadly for a number of investors in the property market, such offers usually are just that.

However, the two-tired marketing practices that have ensnared property investors, especially in Queensland, aren’t afraid to travel, prompting a warning from the Department of Consumer and Employment Protection.

The department has launched a pre-emptive strike against two-tiered marketing practices in the local property sector.

Investors have lost thousands of dollars in the two-tiered schemes after buying property at an inflated, ‘out of town client’ price.

The practice has resulted in a number of complaints on the east coast and the Department of Consumer and Employment Protection is keen to ensure that similar offers don’t find their way into the local market.

The department’s director of business services Anne Driscoll said that, although there had been several inquiries in WA, none as yet appeared to be two-tiered marketing practices.

“Essentially this is property sold way over the market value, often to people from outside the area. The other key component is a high-pressure sales situation,” Ms Driscoll said.

In the past, proponents of two-tiered schemes have approached people with deals that included free airfares to lure prospective investors to visit the site.

Once prospective buyers were at the property, the proponents executed a carefully devised, high-pressure sales pitch.

“In the past, people have been approached through seminars or telemarketing, often for the investment market,” Ms Driscoll said.

“In relation to Queensland, people were flown over and then bombarded with a series of professional experts including property valuers, mortgage brokers and solicitors, all espousing how wonderful the site is.”

And it’s not just the property sector that’s under scrutiny. Banks or financial institutions found to have loaned investors money for inflated sales could face charges for misleading or deceptive conduct or unconscionable conduct.

In the local market there’s little evidence of such sales schemes, but consumer education is the key to preventing the heartache these schemes create.

The real concern is that these two-tiered marketing practices could surface anywhere, operating in a slightly different way in the future.

“We’re emphasising to people to do their homework, which is easily done by virtue of the paper, and to seek independent advice and take your time,” Ms Driscoll said.

Real Estate Institute of Western Australia president Graham Joyce said that, despite the negative publicity, these marketing practices had still attracted plenty of interest.

“My advice is use a licensed real estate agent who has professional codes of conduct, and you know if something goes wrong then those people will be around and you’ve got the full protection of the WA legislation,” Mr Joyce said.

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