A recent survey of REIV members found more than 70 per cent of agents indicated underquoting laws require change. Consumer Affairs Minister, Jane Garrett, has proposed significant reforms to the Estate Agents Act 1980 (‘EAA’) to address this sentiment and tackle rogue operators within the industry.
The majority of underquoting complaints in Victoria stem from real estate agents changing the reserve price moment before the auction commences. However, underquoting isn’t always the fault of the agent but rather the vendor. There’s currently nothing to prevent the vendor from increasing their reserve price the night before or morning of the auction.
The Victorian Government will consult further on the proposed law changes with the intention of legislation being introduced in Parliament later this year.
So, what is underquoting? And, what will fall under the proposed new laws?
What is Underquoting?
Underquoting is, essentially, when a real estate agent misleads a prospective buyer about the likely selling price of a property. Consumer Affairs Victoria states that underquoting occurs when a salesperson:
- Advertises or advises a prospective buyer that a property is available for sale at an amount that
is less than the vendor’s asking price or auction reserve price; or
- Advertises or advises a prospective buyer of a price that is less than the salesperson’s current
estimate of the likely selling price; or
- Advertises or continues to advertise a price that is less than a genuine offer or expression of
interest by a prospective buyer that the vendor refused; or
- Gives an inaccurate appraisal of the current market price of a property
Under the significant reforms to the Estate Agents Act 1980 (‘EAA’), the proposed new laws will include:
- Real estate agents who have been found to be underquoting face fines of $30,000 (double the current penalty).
- Real estate agents risk losing commission and other fees if found guilty of underquoting.
- Real estate agents would be banned from advertising properties using the terms ‘plus’ or ‘offers over’ and the advertised price must be within a 10% range, for example $400,000 - $440,000.
- If a higher than advertised price has already been rejected by the vendor then the advertised price would also need to be updated within 1 business day;
- Real estate agents must provide all prospective buyers with a ‘fact sheet’, which must include:
- 3 recent comparable sales; and
- An estimated selling price; and
- The median price for the suburb.
The reforms – similar to those introduced in New South Wales on 1 January 2016 - aim to assist real estate agents in meeting their obligations not only under the EAA but also under the Australian Consumer Law (ACL). Section 30 of the ACL imposes penalties against a real estate agent who is proven to have made a ‘false and misleading representation concerning the price payable for the land’.
Ms Garrett has stated that these reforms are “about making sure that hardworking Victorians don’t waste time and money on properties they simply can’t afford.” The intention is for the laws to allow for greater transparency, provide for greater consistency in the pricing of property and ensure that prospective buyers have the most accurate information to hand when making decisions.