Feeling misled on price? You are not the only one!
Underquoting in Victoria has become such an issue that Consumer Affairs Victoria has cracked down on rogue agents and changed its laws to make it easier for buyers to estimate a property’s price.
You are certainly not alone if you have ever turned up to an auction believing you have a chance on a winning bid, only to find that the real estate agent has quoted a price well below what it actually sells for. This frustrating experience of underquoting – when an agent names an artificially low selling price to garner interest − is an experience many of us have unwittingly had but until this year there has been little way of combating it.
Prompted by the many complaints it receives about the issue (339 complaints in 2015−16 alone), Consumer Affairs Victoria is passing new laws in the Estate Agents Act 1980 to ensure real estate agents provide clear price guides when marketing property. The Real Estate Institute of Victoria (REIV) has backed the reforms with more than 70 per cent of its agent members believing that underquoting laws required a change.
Effective as of 1 May 2017, agents face fines of more than $31,000 and loss of commission if found in breach of the following:
- Estimate prices must be reasonable and take into account the sale prices of three properties that an agent considers to be the most comparable property of sale
- The estimated selling price must be included in the sales authority (the document that gives the agent permission to act on the seller’s behalf) and be a single price, or a range. A range must not vary by more than 10% e.g. $500,000−$550,000
- Banning of words such as ‘from’, ‘plus’, and ‘offers above’
- If the estimated selling price changes because it ceases to be ‘reasonable’, an agent must inform the seller in writing, update the sales authority and advertising
- The advertised price would also need to be updated within one business day if a higher offer is rejected at any time.
Effectiveness of ‘Comparable Sales’
Some within the industry, believe that the laws don’t go far enough and particularly question the effectiveness of using a ‘comparable sale’ to set a price guide as they are open to interpretation and may not always compare ‘apples with apples’ (i.e. a similar house but on a smaller lot). To combat this, Consumer Affairs Victoria states that a comparable property must be:
- of a similar standard or condition to the property for sale
- sold in the last six months and be within two kilometres of the property for sale (if the property for sale is in the Melbourne metropolitan area)
- sold in the last 18 months and be within five kilometres of the property for sale (if the property for sale is outside the Melbourne metropolitan area).
Agents are not required to take into account comparable property sales to determine an estimated selling price if they reasonably believe that there are less than three comparable sales within the prescribed period as outlined above.
The new laws will mean that from May buyers should be able to rely on correct information to make an informed decision, and hopefully we will see a diminishing, if not an end to the inconvenient and often costly practice of underquoting.
A Cohen Handler Buyer’s Advocate is on your side, ensuring you have the most up-to-date industry research and accurate ‘comparable properties’ to help you find the right property at the right price. To learn more about our services, contact us now.