Although many real estate agents act in good faith, it’s important for property investors and buyers to understand some of the marketing techniques agents employ in order to attract interest in a property and generate a larger pool of potential buyers. Underquoting occurs when a real estate agent intentionally understates the estimated selling price of a property to attract more interest from buyers.
Underquoting is unfortunately common practice within the industry, with complaints to Consumer Affairs Victoria rising from 123 in 2013-14 to 339 in 2015-16. New underquoting laws came into effect in Victoria on 1 May 2017 to combat this, making it illegal for a seller or agent to misrepresent a property in any way.
As the laws are still new, many real estate agents in Melbourne are still behind when it comes to compliance. This makes it crucial for prospective buyers to know how to determine whether an agent is underquoting by knowing what questions to ask and what information you should be provided with.
Real Estate Pricing and Advertising
It’s illegal for sellers and agents to deceive buyers about a property price in advertising and marketing materials, whether verbally or in writing and photographs. The advertised price must be a single figure or a price range of no more than 10 per cent, for example, $550,000-$600,000 as opposed to $600,000 and over.
The advertised price must not be less than the seller’s asking price, the seller’s auction reserve price or the agent’s current indicative selling price. The agent is also obligated to:
- Provide an accurate opinion of the indicative selling price of the property reflective of market conditions
- Update potential buyers if the advertised price changes during the sales campaign, and
- Maintain records to demonstrate what information they used to reach estimates and make adjustments.
How Can Buyers Protect Themselves?
When looking at properties, there are a number of ways buyers and investors can protect themselves from underquoting:
- Ask the agent for a ‘Statement of Information’ which they must provide upon request, include in online advertising and display at open homes. This document should detail three recent comparable sales and the median price for the suburb.
- Research comparable sales yourself by attending auctions in the area and using online resources such as realestate.com.au to access suburb report profiles that detail sale prices and auction results of neighbouring properties.
- Get a second opinion from a real estate agent or buyer agent that isn’t involved in the sale as they will be more likely to give you a true estimate of the price. You can also speak with other residents who are familiar with the area.
If you believe that an agent has underquoted estimated sale price, you should consult Consumer Affairs Victoria (CAV) and file a complaint. Ensure you have evidence to suggest that the agent has been reckless with their quoting.
Penalties for Underquoting Non-Compliance
Real estate agents in Victoria who are found guilty of underquoting can face penalties of up to $30,000 per property along with potentially having their sales commissions and their licence revoked. CAV fined one eastern suburb real estate $550,000 for 11 properties as well as revoking $200,000 in commissions.
Noel Jones – Experts in Eastern Suburbs Real Estate
At Noel Jones, we believe it’s crucial for agents do the right thing, giving potential home buyers confidence and maintaining the integrity of the real estate industry. For property services in the eastern suburbs, including Balwyn, Blackburn, Box Hill, Camberwell, Doncaster, Glen Iris, Mitcham, Ringwood and Wantirna, get in touch with our local team.