Underquoting agents face heavy fines in new Victorian laws

UPDATE: NEW laws penalising underquoting up to $45,000 for every breach and forcing realistic price guides, will be introduced in Parliament today.

Tough new underquoting rules have been foreshadowed in Victoria. Picture: File

NEW underquoting laws that would heavily fine guilty agents, strip commissions and require price guides to be publicised on all homes will be introduced in State Parliament today.

Consumer Affairs Minister Marlene Kairouz today announced that the crackdown would kick in early next year, assuming the legislation passed through both levels of parliament.

The major reforms to the Estate Agents Act 1980, which are backed by the Real Estate Institute of Victoria, will see agents face fines of up to $31,000 per property they are found to have underquoted on.

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They could also lose their sales commissions, which Ms Kairouz said totalled up to $14,000 per property on average: “That’s a hefty amount. And also you’ve got to consider if a real estate agent does this more than once, they will be fined for every property. It’s not just a one off.”

Agents will be required to provide an “information statement” for each home they’re marketing, featuring an “indicative price”, the details of three comparable sales, and median price information for the suburb.

The statement will need to be made available on online property listings, at open for inspections and at buyers’ requests.

Agents will also be forced to advertise a price on every property, with price ranges of more than 10 per cent and terms such as “offers above”, “from” or “plus” banned.

They will also have to prove to Consumer Affairs Victoria — on request — how they arrived at the price guide and update the advertised price within 24 hours if the seller rejects a written offer on a property.

Agents also risked losing their licences if they were found in court or VCAT to have breached the Estate Agents Act, Ms Kairouz said: “It has been difficult to prove that real estate agents are underquoting ... but now Consumer Affairs have got greater powers.”

She said the law changes, which will apply to residential auctions and private sales, aimed to make property advertising more transparent, give Victorian homebuyers a fair go and “(crack) down on dodgy real estate agents”.

“We want to send a very strong message that if you don’t do the right thing by prospective buyers, you will be fined,” she said.

“If somebody really wants a property, you don’t know what they’ll do. There are some bidders out there who will go well above the range.

“But what this does is gives buyers a realistic price range so they won’t waste their time or money on a property they can’t afford.”

Underquoting is when an agent misleads a prospective buyer about the likely selling price of a property.

It is illegal but very difficult to prove, as there is no obligation on a seller to tell the agent their reserve price before auction and in a hot market, it can be higher than the advertised price.

Ms Kairouz said buyers and sellers were increasingly reporting the dodgy practice to CAV, with complaints about underquoting jumping from just 20 in 2011-12 to 339 in the last financial year.

Premier Daniel Andrews said the government was introducing a “common sense package” to “bring some transparency to this area”.

“Underquoting is a great frustration to those trying to enter the property market and that’s why we’ve taken this matter very seriously,” Mr Andrews said.

REIV chief executive Geoff White said the law changes would create a more transparent market and provide “consistency in pricing of property and the information provided to both vendors and buyers”.

But some believe the reforms don’t go far enough.

Veteran agent and former REIV ethics committee chairman John Keating said the only way to stop underquoting was to require vendors to disclose their reserve prices at the start of selling campaigns.

Mr Keating said his clients had been doing so for years, and as long as vendors could change their reserve prices at any time up to signing a contract, the system was open to the practice.

Ms Kairouz said the government would “absolutely” consider this and other possible solutions down the track.

Former Consumer Affairs Minister Jane Garrett announced the proposed reforms in March, stating that they would “change the culture of this industry.”

Ms Garrett said at the time that it was common for houses to be underquoted $100,000 to $150,000 under the reserve each weekend in Melbourne.

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The announcement comes just days after unprecedented court action put Melbourne’s real estate agents on notice about underquoting, with Consumer Affairs Victoria demanding the Federal Court penalise a guilty agency up to $750,000.

Hocking Stuart’s Richmond agency had previously admitted that it underquoted prices on 11 inner-city properties during 2014 and 2015.

Sitesh Bhojani, for the director of CAV, told the court on Monday that the Bridge Rd agency should lose $200,000 earned in commissions on the scrutinised properties and also be fined about $50,000 per property — or a total of $550,000.

Mr Bhojani said one agent at the office told a client via email he needed to “create an illusion of a bargain” to get the best price for them, while another wrote: “unfortunately there’s a culture of underquoting in Richmond. The price range is used more as a marketing tool than an indication”.

Justice John Middleton said he would reserve his judgment on penalty, but remarked that “general deterrence ... is important in a case like this”.

Thirteen further major underquoting are underway, following a series of CAV inspections of real estate agencies across the state.

The consumer watchdog has examined 1400 property files from agents across the state and attended 200 random auctions since forming last year.

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