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.
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.