Victorian regulator puts spotlight on underquoting agents in fiery property market, but what laws cover property sales?

Melbourne

Real estate agents are being warned about letting hot property markets in Melbourne and Sydney lead to misleading claims on price, after a quarter of the properties surveyed by Consumer Affairs Victoria as part of its 12-month review into real estate agent underquoting sold for between 10 and 20% more than their advertised estimated price.

“Taskforce Vesta” reviewed 200 Victorian properties from first listing to sale over the past year, and 63% of them sold for above the estimated price. Of that figure, 30% of properties sold for between 0.1 and 10% above the estimated price; 26% sold for between 10.1 and 19.9% above the estimated price; and 7% sold for 20% or more above the estimated price.

The findings led the consumer watchdog to review 1400 files at 34 real estate agents across the state.

Twenty formal warnings were issued to agents as a result of the review, while there are 13 investigations into underquoting at agencies across the state currently underway.

“Consumer Affairs Victoria is determined to level the playing field for Victorian home buyers,” Consumer Affairs Victoria director Simon Cohen said in a statement following the release of a report form the taskforce last week.

Underquoting has emerged as a major – and emotive – issue over the past couple of years, as the property boom continues and first home buyers struggle to scrape together big deposits.

Read more: Four lessons all investors must understand about property prices

Victoria has also seen court action in this space, with agency Hocking Stuart last month ordered to pay $330,000 for “serious” underquoting of properties, which the Federal Court found was not in line with allowing buyers to make an informed decision on a property.

“The conduct involved the creation of an enticing (but illusory and fictitious) marketing web for the sale of 11 different residential homes,” Justice John Middleton said in his judgment on the case.

Legislation was passed through the Victorian Parliament last week that will force agents to give greater context around how they reached an estimated sale price, including using at least three comparable sales as a reference point for advertising the estimated price.

What is an agent legally required to do?

TressCox Lawyers partner Alistair Little told SmartCompany property sales are both a consumer affairs issue and a question of laws specifically for the real estate industry.

“These cases [can be] false and misleading conduct in breach of Australian Consumer Law, and can also be in breach of the state Agent’s Act,” he says.

“It’s an offence to deliberately advertise a property for less – say if the vendor thinks it will sell for between $700,000 and $800,000 but you say it will sell for $600,000.”

Little says penalties for underquoting can be both financial and compliance focused – agents can have training enforced to prevent cases from happening again – however, it’s unlikely that a buyer will chase damages if they have been wronged by false price advertising.

Given the few thousand dollars sometimes involved in researching and preparing to buy a property, someone could theoretically seek damages “if they were able to show they had suffered loss for a property that was never in their price range”, Little says.

“It’s not very likely – though jurisdictions like VCAT [Victorian Civil and Administrative Tribunal] do handle it,” he says.

While buyers seem wary that anything can be done to truly stop underquoting in big Australian cities, Little says a solution like Victoria’s Estate Agents Amendment Act can go some way to protecting agents and buyers.

“It’s a sensible way of drawing some kind of benefit for agents – not only does it provide protection to consumes, it also provides protection to agents, with the market pretty hot,” he says.

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Laurie Dacy
Laurie Dacy
5 years ago

‘Build ’em up. Kick ’em down.’
That’s always been the first real of property sales, hasn’t it?

helma Parkin
helma Parkin
5 years ago

Wish someone would do something about the agents at Samford that come to the house and when they ask what you want to sell it for and you say you dont really know , so they do a contract for $760,000 and three weeks later after bringing no one, say you priced it to high yet they set the price. There great for trying to get a quite sale of at least $200,000 less that the market value and even at less than the dirt is worth.

Janelle
Janelle
5 years ago

I am in the Newcastle area and this is happening a lot. The agent brags online that they sold way above the asking price. One property I enquired about which to me was clearly under-priced was already under contract -sold in record time!! When I ask what the selling price was…surprise surprise it sold for well over the asking price (the truth it was sold what it was truly worth) I commented I could have told you that and I am not an agent… you are no very good at pricing. They just mumbled sometimes it is hard to predict in this market… utter rubbish. More chest beating about how fabulous they are on Facebook. They know exactly what they are doing. It is very misleading and completely unethical.

Rohan
Rohan
5 years ago

What a joke. If it goes to auction and the auction goes bananas from the prospective buyers getting carried away in the moment, it’s the Agents fault? And legally they have to give a very limited price range when they quote. It wouldn’t take much for it to go over range as a result.

If it’s a general listing, that’s a very different issue.

Another example of overreaching bureaucracy and red tape.

jota6689
jota6689
5 years ago

And when are the laws going to be applied to the valuer general and councils that rip off taxpayers by ‘overvaluing’ property so that they can impose increased rates. For example we challenged a valuation only to be told that they used comparable sales data. Fortunately for us they were stupid enough to give us the addresses of the properties that were ‘comparable’. Guess what. The other properties were blocks of units whereas our property is a single story dwelling.