Test #1: Does it apply to every property?
If a developer offers a cashback on every property, it’s not a genuine incentive.
Their properties are overpriced, and they know it.
Wofbrook’s cashback fails on this test because it applies to every property. Why not just give a discount?
Test #2: Is the cashback in the contract?
If the developer doesn’t want the bank to know, that’s probably because it’s not squeaky clean.
When my journalist talked to Wolfbrook, they got the fine print. It looks like the cashback is in a secondary contract.
So, there’s a risk that the cashback is hidden from the bank. That fails the second sniff test.
Test #3: Is there a valuation to show it’s a genuine discount?
To see if a cashback stacks up, you really need to get an independent registered valuation.
If the valuation comes in lower than the purchase price, you know the cashback wasn’t a genuine discount from the start.
The developer is doing a Briscoes. They’re “marking up to mark down.”
So, developers should actively encourage buyers to get an independent valuation.
When my journalist talked to Wolfbrook’s sales team, that didn’t happen.
It’s not a straight ❌. It’s more of a question mark right now.
So, right now, this deal doesn’t pass my 3-step sniff test.
Why don’t they just lower the price?
I’m not a huge fan of developers offering cashbacks.
We’re constantly told that we have a housing crisis in New Zealand.
If a property is well-priced, it will sell. And you don’t need a gimmick to sell the property.
If it’s overpriced, it won’t sell. So, you have to find gimmicks to get people interested.
I’ve worked with Wolfbrook in the past. But this is something that I disagree with them on.
If you’re looking at these deals, get a valuation and ask for a discount instead.