Promises of ‘instant equity’ from property investment firms to student landlords and buy to let owners are in breach of advertising standards.
The consumer champion that protects the public from false claims in adverts has ruled property finders will have to prove the buyer makes an instant equity profit in their marketing material from now on.
The catch is they can probably never do this as in virtually every case, the equity in the property is the difference between the buying price and the cost of repaying any mortgage and fees - not a figure put on the deal by a salesman.
The decision comes from a complaint upheld by the Advertising Standards Authority (ASA) about Nottingham-based Property Secrets.
The company sent out a marketing email stating: "I wanted to highlight a fantastic opportunity we have secured ... Having managed to negotiate a substantial discount of 20% per unit offering up to £25,999 instant equity, in one of the UK's most prosperous cities, it is no surprise we have just 3 left now! ... Key Points: 20% OFF Developers [sic] Marked Price ... Instant Equity up to £25,999 …”
The ASA found the email broke the advertising code as misleading, unsubstantiated and exaggerated.
Property Secrets has agreed not to use the phrase ‘instant equity’ in marketing materials.
The complaint challenged if the instant equity claim could be proved.
Property Secrets provided paperwork allegedly showing the discount and prices of nearby similar apartments.
Their submission also argued the property industry used ‘instant equity’ to describe the discount offered on a developer's list price and/or actual sale prices for properties on the same development.
“We considered that consumers were likely to interpret the term ‘equity’ in this context to mean the amount of money they would be left with if they sold the property, once any outstanding mortgage charges had been paid off,” said the ASA.
“We considered that sold prices or independent valuations were not necessarily accurate indicators of how much equity a property owner had in a property and that equity was a nebulous concept which could not be quantified easily.
“Because we had not seen robust substantiation to support the claim "Instant Equity up to £25,999", we concluded that the claim had not been substantiated and was misleading.”
See the full ASA report [Link: http://www.asa.org.uk/ASA-action/Adjudications/2012/3/Property-Secrets-Ltd/SHP_ADJ_182530.aspx ]
