Victorian election real estate dramas: Underquoting and "election stunts"
Victorians are heading to the polls this week and a hot real estate topic has become a divisive issue.
The evocative underquoting topic recently became an election issue, with the Victorian Coalition announcing a plan to bring in new laws to stop the already-illegal practice.
The proposed legislation would:
- Ensure that a reserve price must be within the advertised range
- Make it mandatory to advertise houses with a listed price or price range
- Make it compulsory to include a reserve price when signing a sales authority with an agent
- A reserve price may be changed up to three days prior to the auction, and any change to the reserve price will need to be reflected in advertising for the property
- Fine real estate agents who break these rules up to $29,000
The price range should have a maximum 10% difference from the lowest to highest amounts and more random audits will be required.
They are calling the hotline a “dob-in” hotline and it is expected that Consumer Affairs Victoria will be required to police the legislation.
The legislation would be introduced to Parliament next year if the government is re-elected.
“The Coalition will crack down on the small number of rogue real estate agents who mislead home buyers by underquoting house prices, introducing legislation to completely outlaw the practice,” the Napthine government’s plan explains.
“The Australian dream is to own your own home, but over recent years underquoting has become a routine part of Victoria’s real estate market, leading to bitter disappointments for people searching for their own home. Every home buyer knows the disappointment and frustration of finding the perfect home, only to turn up on auction day and find that the reserve price far exceeds the quoted range.”
They note that in 2013/2014 there were six times as many complaints as two years earlier. They say that the initiative would not have any negative impact on house prices nor disadvantage sellers.
Some in the industry have been supportive of the proposals, while others, including the Real Estate Institute of Victoria, have called it ‘an election stunt’.
Consumer Affairs Victoria currently have guidelines for agents to stop underquoting, that include the following:
- If a price range is advertised or quoted, the lowest amount in the range must not be less than the vendor’s selling price. If the vendor has not provided a selling price, the lowest amount in the advertised price range must not be less than your current estimate of the likely selling price.
- Price advertising, marketing and advice must be updated for any genuine offers on price which are rejected by a vendor during a sales campaign.
- If the lowest amount in the range falls below your estimated selling price or the vendor’s selling price, the practice is misleading and constitutes underquoting.
- Price plus (+), over, in excess of (>), from, quoting greater than, expect over, offers invited from are considered misleading.
Property Observer is aware of a general perception in the industry that Consumer Affairs Victoria faces some difficulties around policing the current policies.
Property Mavens’ Miriam Sandkuhler, who has been petitioning for changes to stop underquoting in Victoria, explained to Property Observer that many of these suggestions are a step in the right direction and that the current situation is inadequate.
“Current legislation isn’t working because there are loopholes that permit underquoting to continue to flourish, which leaves both buyers and sellers of real estate disappointed and disadvantaged. The lack of adequate enforcement by CAV perpetuates the problem and both issues need to be addressed urgently,” she said.
Sandkuhler also noted that the reserve price should form the bottom end of the quote range, rather than be ‘within’ the range, as otherwise underquoting can still take place.
She also noted that a single figure reserve price should be stated as a mandatory on the sales authority form, rather than a range or a TBC, and that the reserve price should not be able to be altered as it allows step pricing, or bait pricing.
Her other area of concern is the lack of legal requirement for the vendor to have all contracts and legal documentation available for purchasers from the start of the marketing campaign – something that is out of line with New South Wales’ rules.
The Real Estate Institute of Victoria’s Enzo Raimondo, however, has criticised the announcement of the new rules, telling the ABC that underquoting is already illegal, with regular audits conducted by Consumer Affairs Victoria.
"The fine for underquoting is $29,522 at the moment, so not sure what this government is playing," Raimondo said.
Raimondo went on to criticise the government for not consulting with the real estate industry.
"My experience with the Napthine government is they don't do that, they work in blissful isolation of the industry ... and this is just an election stunt because everything regarding underquoting is already in place," he said.
Labor’s Shadow Attorney-General Martin Pakula told reporters that the government has not been properly enforcing the currently existing laws.
"Before they announce a stunt a week out from the election, perhaps they ought to have a conversation with the industry,” Pakula said.
Raimondo has been vocal against the Napthine government, placing advertisements in the Ballarat Courier recently, urging to “vote them out”. Ballarat is viewed as a key election battleground, with three swing seats in the region.
“The Liberals’ new real estate laws hurt small business and cost jobs,” Raimondo said, in reference to recent commercial licensing changes.
Source: The Ballarat Courier, 21 November, Page 8
The advertisements have also been heard on radio station 3AW this morning.
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RealAs' Josh Rowe provided the following statistics around underquoting and where it is most prevalent in Victoria based on October 2014 data.
Ten worst Victorian suburbs for underquoting:
Source: realAs
Ten best performing Victorian suburbs for accurate agent quotes:
Source: realAs
"In Victoria underquoting is endemic, rampant, it’s grubby, it’s misleading and deceptive and it’s a fraud on home buyers," explained Rowe.
"Consumer Affairs Victoria lacks the necessary laws and resources to police underquoting. Real estate agents enjoy the luxury of loop holes in the rules to bait home buyers into attending auctions which are outside their budget. This frustrates buyers. Underquoting causes home buyers to waste their time, money and causes heart ache," he said, noting that the current rules are unenforceable and that the reserve price can be in another universe to the quoted range, but remains hidden from buyers," he said.
"If the elected Victoria government (of whatever political persuasion) legislates that the agent quoting range does include the vendor's reserve and gives Consumer Affairs Victoria the resources to monitor and enforce breaches, then this would go some way to reducing the endemic problem of underquoting in Victoria."
"The REIV (representing real estate agents) is actively campaigning against the Liberal Party on their proposed underquoting reforms. However, not all real estate agents underquote. Does the REIV truly represent the views of the real estate industry?"
In Queensland, law changes to remove price guides entirely, set to come into force at the start of December, were introduced to combat underquoting fears. Real estate expert John McGrath has called the Queensland price guide bans a move that could take the industry “back 50 years”. The Real Estate Institute of Queensland has been in strong support for the changes.
Buyer’s agent Patrick Bright, who has been advocating for changes to stamp out underquoting in New South Wales, expressed his support for the detailed changes for Victoria, calling them a “pretty good step in the right direction”.
"I would like to see them come into NSW as well in addition to publishing the reserve seven days out. Then I think we would have a much more transparent property auction system,” said Bright. The publishing of the reserve price is the topic of his current petition.
"So far we have seen the Queensland government implement changes to prevent underquoting from taking hold in their property market. Now we are seeing the Victorian government officially recognising the extent of the underquoting problem and proposing sensible changes that will have a significant impact on the future transparency of the real estate industry in their State."
"On the other hand in New South Wales we are seeing more of the same denials about the extent of the underquoting issue and a reluctance to enter into a legitimate debate on possible changes to make the auction process more transparent for both buyers and seller."
Here is the data from realAs for New South Wales.
Ten worst NSW suburbs for underquoting:
Source: realAs
Ten best performing NSW suburbs for accurate agent quotes:
Source: realAs
FURTHER READING
Six must know facts about underquoting
Letter from the editor: More information not less please Queensland
