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Weak, Unenforceable Victorian Underquoting Laws

Weak, Unenforceable Victorian Underquoting Laws
March 11, 2016 Josh Rowe

Proposed changes to Victorian underquoting laws are weak and unenforceable.

 

Minister Jane Garrett announced new Victorian underquoting laws aimed to reduce the heartbreak felt by homebuyers which miss out on buying their dream home but miss out on auction day because the selling price far exceeds the real estate agent quoted price.

Under the proposed new laws, the key changes proposed by the Andrews Government are:

  1. Fines could double for underquoting to $30,000.  Agents will also risk losing any sales commissions and other fees if they are found guilty of the dodgy practice. This could represent an additional penalty of around $14,000 on an average home under the proposed laws, or far more on blue chip properties.
  2. Agents would be banned from advertising properties with ‘plus’ or ‘offers over’, and the advertised price must be within a ten per cent range (e.g. $500,000-550,000).
  3. The advertised price would also need to be updated within one business day if a higher offer is rejected at any time.
  4. Agents would also need to provide all prospective buyers with a ‘fact sheet’ which must include three recent comparable sales, the estimated selling price, and the median price for the suburb.

1. Fines could double for underquoting to $30,000.  Agents will also risk losing any sales commissions and other fees if they are found guilty of the dodgy practice. This could represent an additional penalty of around $14,000 on an average home under the proposed laws, or far more on blue chip properties.

  • 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.

2. Agents would be banned from advertising properties with ‘plus’ or ‘offers over’, and the advertised price must be within a ten per cent range (e.g. $500,000-550,000).

  • This is consistent with NSW 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.

3, The advertised price would also need to be updated within one business day if a higher offer is rejected at any time.

  • 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.

4. Agents would also need to provide all prospective buyers with a ‘fact sheet’ which must include three recent comparable sales, the estimated 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.

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 watching and reading

Victorian government announces crackdown on real estate underquoting

Melbourne real estate agents face $30,000 underquoting fines

 

 

 

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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.