A buyer's agency director has highlighted the dangers brokers face in giving clients unqualified property investment advice.
Fred Haggard, director of Property Search 4U has offered the story of one client who bought three off-the-plan units in Queensland last year on the advice of another mortgage broker and then couldn't secure financing to upgrade his Sydney home.
“His bank advised that his borrowing capacity has been greatly diminished because the valuations of his three off-the-plan investments are now less than the 100% of purchase price loans he took out,” Mr Haggard said.
“He overpaid by an incredible amount for the units and in our assessment the market will take six years to catch up with the prices he paid.”
According to Mr Haggard, while brokers are qualified to assess someone's borrowing capacity, they're not qualified to tell their clients what to buy, or where and when to buy property.
“A client might ask, ‘Fred, what sort of loan should I take out?’ Unlike a mortgage broker who might put forward a property, we do not tell the client what is the best loan, or whether they should go principal and interest or interest only,” Mr Haggard explained.
“We always tell them to go to their bank or their broker because they’re the ones qualified to answer that.”
Mr Haggard's comments have been echoed by FBAA chief executive Peter White who said qualified finance brokers who wish to assist clients in property purchasing need the necessary qualifications and training or be at risk of a life-changing personal payout.
One broker who breached his duty of care, by giving incorrect and unqualified advice, was forced to pay the Credit Ombudsman Service more than $115,000 while his client was forced to sell an investment property at a substantial loss and take legal action against the broker.