WA Building Brokers Not Bound by Best-Interest Laws, Regulator Warns
Consumer Protection WA says people hiring a building broker should ask who pays them, which builders they use and what they do if things go wrong. Brokers typically earn 2.5 to 4 per cent of the construction price, paid by the builder.
Consumer Protection WA has urged home builders in Western Australia to ask a building broker a set of questions before they sign up, because the service is not covered by laws that force brokers to act in a client's best interests. The agency's commissioner, Trish Blake, said buyers should know exactly how the person is working for them.
How building brokers get paid
Building brokers connect people who want to build with builders, in a role similar to a mortgage broker. Clients do not pay them. The building company that wins the work does.
Fees typically range from 2.5 to 4 per cent of the construction price, according to the account given by Daniel Paton, whose business offers property advocacy help to people wanting to build their own home.
Paton said the model follows an older one. "Before building brokers, there were sales reps who worked for the builders to facilitate the signing-up of projects for builders," he said. Those reps were paid by the builder as a percentage of the construction cost.
He said alternative building methods have driven demand for brokers in WA. "A building broker can be really beneficial just to help you think about things you might not have considered," he said.
Conflict of interest
Asked whether builder-paid fees create a conflict of interest, Paton said any good broker would explain how and when they are paid. He compared that to the practice of a good mortgage broker.
Blake said the payment structure is the first thing to probe. "Particularly given that the builder will pay for this service, as a consumer, I would want to know how that person is working for me," she said.
Questions to ask
Blake said unlike financial advisors, building brokers are not currently regulated by laws that compel them to act in a client's best interests. The Australian Consumer Law still applies, she said, because the broker provides a service.
Under that law, the service must be fit for purpose and delivered with due care and skill. Brokers cannot be misleading about any aspect of it.
Blake listed what she would ask:
- Which builders the broker works with, to confirm she has a broad choice.
- What the broker's role is if things go wrong, and whether they will advocate for the client.
- What the broker's background and qualifications are.
She also reminded consumers that the legal contract carries their name, not the broker's. Customers should read closely what they are signing up to, she said.
