Agents are sometimes prepared to pull out all stops when it comes to online listings. But investors should be aware of their clever tactics.
Have you ever found a house online that seemed too good to be true? Those huge rooms, that amazing rental appraisal or perhaps a listing in your dream suburb, albeit two streets down the road? It’s easy to fall in love with properties that shine and sparkle online but unfortunately, a good old case of photoshopping can sometimes turn your happiness into heartbreak. That’s why it’s important to treat some online listings with caution and do your homework before begging your hubby (or wife) to sign the contract with you. API looks at some of the tricks agents might use to win your heart over your head.
It’s a fact that most people look at the furniture more than the room when inspecting property and are often attracted to the emotion of it all. The Sheridan sheets and shabby chic chairs might be just the sort of luxury you fantasise about getting your hands on. Agents know this and sometimes photoshop furniture into their online advertisements. It doesn’t stop at tables and beds either – think green grass instead of dirt, brighter paint colours for the home’s dated exterior and even removing clouds to make the sky seem a deeper shade of blue. That brown river instantly turns blue with just a few clicks or perhaps you can see amazing harbour views. But those great views might be seen from the street, rather than the actual balcony or bedroom.
Jane Slack-Smith of Your Property Success notes she has seen fires photoshopped into fireplaces. While she has no problem with agents using a bit of creativity, she advises investors to inspect the property themselves and validate its features.
Agents can also use wide-angle lenses to make the tiniest of rooms seem spacious. Property millionaire and author Jan Somers says the best way investors can be sure about room sizes is to have a careful look at the floor plan.
“It doesn’t matter if they photoshop a room 2.8 metres by 2.9 metres, and they show a desk there, probably without a chair, because that puts it into perspective,” Somers says.
“A look at the floor plan will tell you. There’s no doubt about it, a property with furniture presents better.”
Somers ditched a handbag many years ago, instead never leaving the house without a tape measure. She always measures rooms and even the height of the kitchen table at open home inspections.
“This allows you to know, ‘if a bed fit in that room, will the door still open?’ Go with a tape measure, that will put it into perspective.”
Have you ever been told you can subdivide the block or build a granny flat out the back? Oh, but that’s subject to council approval (STCA). What this effectively means is that you can’t do anything at all until you have actual approval from council. In some cases, that promised potential could be used to try and get your signature, but investors should always do their own checks, perhaps engaging the services of a town planner if unsure.
Somers recalls a situation where an investor who purchased a block of flats, under the impression a third level could be created STCA, was able to pull out of the deal post-auction. This was on the grounds that council wouldn’t allow a third level, despite the STCA promises of the agent.
“They paid a price which indicated that yes, you could already put a third storey on it. You should never pay the price for the ‘might of’ or ‘possibility’,” Somers warns.
“The property might have water views if you cut the trees, there might be a granny flat. But don’t pay a price based on the ‘could be’ or ‘might be’. Whatever you’re told, don’t pay a price based on vague possibilities.”
You might also get the impression you can split the block STCA or rent a house separately to a granny flat.
Ali Hammoud of Planzone Consulting says agents aren’t all that bad – they don’t intentionally say STCA for the sake of it. But some aren’t aware of the rules.
He adds council might instead not grant approval because the actual application is poor.
“Some agents will put a disclaimer in the contract but they won’t use the STCA terms unless they know there’s at least some likelihood. It comes down to the right process,” Hammoud says.
“I’ve seen a few where garages have been converted into granny flats without approval. It might say the garage can be used as a granny flat STCA. Agents will always cover themselves by saying STCA. There are also some developments that at the end of the day, you just can’t get approval for, because it’s not the right type of site for development. For those kinds of things, I normally suggest the advice of a town planner.”
Inflated rental appraisals
A property for $500,000 that would rent for $520 per week? Sounds pretty good right? Somers warns against taking an agent’s rental appraisal seriously.
“They’ll give an appraisal that’s high because they want your business,” she says.
“There’s nothing like making your own judgment and underestimating rather than overestimating.”
Slack-Smith adds some agents might suggest the rent is below what it could be. But in reality, the tenant might have just signed a 12-month lease.
“Personally I would review suburbview.com and I would pull up other three-bedroom homes (for example) in the area, to look up comparable rentals,” she says.
“I would see how many properties are actually for rent.”
When blue chip is cheaper
Everyone knows the phrase ‘blue chip’ means best. Slack-Smith warns some agents might say the area is in fact blue chip, when it’s actually the suburb next door. They might advertise the property as being based in Darlington rather than Redfern in Sydney, or in Seddon rather than Footscray in Melbourne.
“It’s capitalising on better areas,” she says.
“Know where your boundaries area. Usually there are online council plans and you can google map boundaries.”
They might also advertise the fact that the property is near a great school, but this doesn’t mean it’s in the catchment area.
“A certain catchment area in Melbourne was moved last year. You might be quite close to the school, but if you’re not in the catchment area, you can’t send your kid there.”
Agents might be happy to reveal the strata fees online, but fail to tell you there’s a huge levy about to be imposed.
Slack-Smith recalls a situation when she asked an agent if there were any strata issues and he told her “nothing too serious”. Luckily she checked – and found out each unit owner was up for $100,000 each to fix concrete cancer.
“There’s no way the agent didn’t know that,” she says.
“They might have been privy to someone pulling out due to a building and pest inspection and obviously they’re not passing on that data.”
Agents might also pass on the contact details from a friend or close associate who will be reluctant to disclose problems with a house. Slack-Smith says it’s always best to find your own professional who can do a building and pest report for you.
Online advertising isn’t just about what’s included. More often than not, it’s those sneaky omissions that you might pay a fortune for to fix later.
Somers recalls an incident where an agent told a buyer that the good thing about the house was the noise from the main road could hardly be heard inside.
“They said ‘what main road?’ Well, that was the end of that sale and he learnt to keep his mouth shut,” Somers laughs.
“It’s almost lying by omission but it’s not illegal.”
Agents might also be reluctant to advertise the fact a property recently flooded, so it’s up to the investor to check with council and find out exactly how close the flood line came to the property.
Or they might not tell you that a rail line is about to be put right next door to your house.
“I remember looking at a place that had a clearing at the back and the agent said ‘that’s where the old rail line used to be, but there’s no chance of it coming back’. Eight years later the train line was there and the house was right next to the station. I would have had trains virtually in the backyard.”
On the other hand, Somers also bought a property Kippa-Ring, believing a train line would link the area with Brisbane.
“The house would be a prime location, with the station 300 metres away. Properties were sold on the basis there would be a train line coming. But that was over 40 years ago and it has never happened.”
Slack-Smith says some agents might have an open home at a time when they know planes won’t be flying over the area.
They might also have an open home when the sun is in the best position or when there are other open homes at the same time, to create more foot traffic.
To make sure you won’t be living in shade all year apart from a few sunrays between 11am and 12 noon, Slack-Smith says it’s always best to drive past the property at different times of the day. In fact, she’s even gone one step further – commuting from the Sydney CBD to a prospective investment property during peak hour.
“The agent said I would be able to tenant it easily because it was eight kilometres from the CBD. But when I got off at the station, it was dark, there were lots of dodgy coffee houses and the walk to the house wasn’t well lit,” she says.
“If they’re single professionals, try out what it’s like coming home from work.”
She recalls another story where some clients bought a property, unaware it was near a quarry and the plant operated throughout the night.
“Other things agents might do would be getting tenants to paint an area that has really bad damp,” she says.
“If you smell new paint, knock on the wall. They’re usually covering something up.”
Moral to the story
Still convinced you’ve found the right property for you? Then make sure you do your homework and take online advertising with a grain of salt, Somers says.
“Always believe that a property is going to be upsold,” she says.
Investors should also consider the location, google maps and the land size when it comes to buying property.
And don’t get angry. Get smart.
“Never believe impossibilities,” Somers says.
“Look for omissions and oversights.”
This article was reproduced with permission from Australian Property Investor magazine, www.apimagazine.com.au