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REALas Australia’s most accurate property price predictions

Victorian Underquoting Laws Will Fail

Victorian Underquoting Laws Will Fail
August 18, 2016 Josh Rowe
victorian underquoting laws will fail

Victorian Underquoting Laws Will Fail

Victorian underquoting is out of control.  The worst Victorian real estate agents bait home buyers with prices 28%-22% under the real selling price.  New Victorian underquoting laws announced by the Andrews Government will fail.

Rogue real estate operators which underquote property prices to unsuspecting property buyers will continue to do so under new laws introduced into Victorian parliament today.

Underquoting is where a real estate agent misleads a potential home buyer about the likely sale price of a property.

Under the new laws, agents must provide prospective buyers with a comprehensive market analysis including three recent comparable sales, an indicative selling price, and the median price for the suburb.

The new Victorian underquoting laws will also mean:

  1. Advertising price ranges of more than 10 per cent (e.g. $500,000-550,000) is banned
  2. Words or symbols in advertising such as “offers above,” “from” or “+” will be banned
  3. Advertising must be promptly updated if the seller rejects a written offer to purchase, or the agent’s price estimate changes
  4. Agents found guilty of underquoting could lose their sales commissions
  5. Agents have to prove on request from Consumer Affairs Victoria how they arrived at the estimated price
  6. Real estate agents caught underquoting will face hefty fines, with new offences with penalties of more than $31,000.
  7. The new laws are part of the Labor Government’s work to make the real estate industry fairer. The Government has consulted with the Real Estate Institute of Victoria (REIV), which has backed the reforms.

Consumer Affairs Victoria’s Task Force Vesta was established in mid-2015 and has examined around 1,400 sales files, with 13 investigations underway and one matter before the courts.

“Victorian homebuyers deserve a fair go. This is about making sure they don’t waste time and money on properties they can’t afford.” – Marlene Kairouz, Minister for Consumer Affairs, Gaming and Liquor Regulation

Here is why the Victorian Underquoting Laws will fail:

Under the new laws, agents must provide prospective buyers with a comprehensive market analysis (CMA) including three recent comparable sales, an indicative selling price, and the median price for the suburb.

  • How does Consumer Affairs Victoria ensure that the comparable sales are truly comparable to the property for sale?
  • This is a potential grey area where rogue real estate agents can use lower priced comparable sales to underquote, whilst still “complying” with the new laws.

1. Advertising price ranges of more than 10 per cent (e.g. $500,000-550,000) is banned

  • This is consistent with NSW underquoting laws whereby if a price range is used, the highest price must not be more than 10 per cent higher than the lowest price.
  • This is an appropriate reform as long as it’s an accurate quote from the agent.
  • Does the new law mandate that this price range must include the agreed vendor reserve price?

2. Words or symbols in advertising such as “offers above,” “from” or “+” will be banned

  • This is consistent with NSW underquoting laws.

3. Advertising must be promptly updated if the seller rejects a written offer to purchase, or the agent’s price estimate changes

  • NSW agents are required to keep a written record of every statement of price they make to buyers, prospective buyers, vendors and prospective vendors,
  • How will VIC offers be recorded?
  • Will Consumer Affairs Victoria have the ability to audit offers received?
  • Record keeping is important if the Victorian Government and the REIV really do seek to provide a transparent system.

5. Agents found guilty of underquoting could lose their sales commissions

  • In NSW agents found guilty of underquoting are liable to forfeiture of any commission or fees from the sale in addition to the existing penalty of $22,000.
  • Why not fine the Agency principal too?
  • Fines are only a useful deterrent against bad behaviour if convictions are successful.
  • Where the practice of underquoting is severe why not take away the real estate agent’s licence?

6. Agents have to prove on request from Consumer Affairs Victoria how they arrived at the estimated price

  • What level of evidence is required to meet Consumer Affairs standard of proof?

7. Real estate agents caught underquoting will face hefty fines, with new offences with penalties of more than $31,000.

  • Consumer Affairs Victoria’s has a poor track record for catching underquoting real estate agents.

8. The new laws are part of the Labor Government’s work to make the real estate industry fairer. The Government has consulted with the Real Estate Institute of Victoria (REIV), which has backed the reforms.

  • The REIV represents real estate agents who act on behalf of sellers of property.
  • For these new laws to be a success home buyers should be singing their praises.
  • Rogue operators will flaunt the new laws, therefore they will fail in their current form.

The elephant in the room

Rogue Victorian real estate agents which want to underquote under the proposed laws will continue to do so.

NSW agents must not quote a figure less than their estimated selling price provided in the agency agreement.

However, proposed Victorian underquoting laws are silent on what is quoted to prospective home buyers versus what is in the vendor/agency agreement. At the moment the reserve price can be changed moments before the auction commences. Rogue real estate agents currently exploit this loophole by only nominating the official reserve price on the day of the auction. Even though most agent/vendors have an implicit agreement on the reserve at the time of signing the agency agreement.

More reading

Victoria cracks down on underquoting

Underquoting: agents face new laws forcing them to publish indicative selling price

Underquoting agents face heavy fines in new Victorian laws

 

 

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    The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of REALas.


 

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