When I started in property management with Peter lees Real Estate over 11 years ago the average commission paid to an agent was around 8%, the average commission in the industry now is 9.5%. The Real Estate Institute of Tasmania has a recommended fee that they distribute as a guide for agents to ensure they remain profitable and offer a quality service. The current recommendation is almost 13%. If agents are still discounting as low as 7%, consider the affect this has on the industry and on your investment.

In reality this is what happens in many cases: Property investors are demanding cheap fees and many agents are discounting to secure the business.  Inexperienced property managers are paid low salaries, they usually have little or no qualifications or experience They are expected to maintain a very heavy work load with up to 250 properties managed per person, the service levels drop and short cuts are the only way to keep your head above water. Often the property manager is offered no training or support. The result: the property manager leaves and eventually the agency may sell your business to another company. Often this happens without the client even knowing. Then they get a letter from the new agent to say they now manage your property and they have exclusive agency rights as a condition of the sale.

The Blame Game...  

So, who is to blame when something goes wrong with the management of your property, when a mistake is made, when you lose money as a result of poor management?

Sadly the owner generally blames the property manager, causing them added stress and anxiety.  As it is, they can’t sleep at night worrying about the countless tasks they are responsible for, the 40-50 calls a day, 20 maintenance jobs and quotes to arrange, paying accounts, property condition reports, making insurance claims, renting vacant properties, chasing rent arrears, signing leases, renewing leases, routine inspections, final vacate inspections, reading water meters, dealing with conflict and complaints….and the list goes on and on and on!

It seems owners and principals constantly expect more from a property manager, at the same time the fees keep getting cheaper and salaries remain the same! It’s not rocket science and pretty easy to predict the outcome: High staff turnover, poor service and a very exposed property investor at risk of losing thousands.

I have spoken to many investors that have had experiences where their current agent has no record of the property condition prior to the tenants moving in, no photos or evidence in the event the property is damaged during the tenancy and in many cases the property hasn’t been inspected for several years.

In one case last week, I took over management of a property where the agent couldn’t even tell me tenant’s phone number or rent “paid to” date, nor could they provide a property condition report, the last report was from 3 tenants ago!! The excuse from the agency was, and I quote “the bloody property manager walked out and left us in a mess! We don’t know how to access the computer software to get any information, we are working on it”

When the owner advised that he was transferring the property to another agent, the principle pleaded for him to stay and offered him 4 months free management and what ever it takes!. “Makes sense pay nothing = get nothing that’s fair”.....the owner refused the offer!

Investor loses thousands...

An even worse scenario recently, an agent rented a property without confirming the details with the owner. They put a tenant in her property without checking references, rental history or even getting photo identification.  To cut a long story short, the tenants moved in without a property condition report, stopped paying rent after the first fortnight, trashed the property and did a midnight run to the mainland. As a result the owner suffered over $10,000 worth of loss in damages and rent default, they had no evidence to claim through insurance because the agent failed to provide the most essential document when renting the property and the loss of rent claim was declined for 2 reasons, the lack of information collected prior to letting and the arrears follow up from the agent during the period of loss. They failed to mitigate the loss as per the policy conditions.

Where does the buck stop?

The agent will blame the property manager that left….the property manager will blame the principal because of the pressure they were put under and the insurance company blames the agent…vicious circle.

Who pays?

In most cases the client/property investor has exhausted all avenues blaming the agent, the agent refuses to be accountable and eventually stops responding to the client.

Can you take legal action against your agent?

Absolutely….the problem is, at this stage the investor has suffered so much loss, that in order to engage a solicitor they need to win lottery! On the other hand the agent has professional indemnity insurance and has very deep pockets. They will hire the best barrister in town and drag the case on for as long as possible in the hope that the client gives up.

A lot of owners who have had a negative experience with an agent now rent privately, in a lot of cases this can be the safer option!  At least you have some control over what happens to your investment.  Managing a tenancy on your own can be easy, so long as nothing goes wrong!!!  Sadly, things do go wrong and it’s not until it does that you find out just how good your agent is and how thorough they have been with their internal procedures “behind the scenes”

As a property investor, your best protection is education.

• Ask the right questions before appointing your property manager

• Get a written guarantee protecting you against the risks of mismanagement

• Ensure the agent takes responsibility in all areas that effect your income

• Pay a fair fee to the best agent! Don’t ask them to discount a quality service!

Not all agents are the same... 

I should stress to you that not all agents are the same. It’s up to you to do your research.  Ask yourself?  What defines cheap? A huge discount? Or value for money?

Contact our office for your FREE Investors consumer protection guarantee and checklist of important interview questions when appointing a property manager.

Article written by - Michelle Williams

This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  

Tuesday, October 16, 2007