Real Estate Agents be Warned
In a decision handed down this week by the Federal Court of Australia, Hocking Stuart Richmond was fined $330,000 for underquoting on 11 separate properties.
In a lesson which should be learned by all real estate agents, Consumer Affairs Victoria have put agents in the firing line.
The Court held that “Underquoting can arise in many forms including where the estate agent:
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;
advertises or advises a prospective buyer of a price that is less than the salesperson’s current estimate of the likely selling price;
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; and
gives an inaccurate appraisal of the current market price of a property.”
Whilst the order against Hocking Stuart Richmond was for $330,000, Consumer Affairs had been seeking $750,000 which was on the basis that the agent had received approximately $200,000 in commission from the practice concerning the relevant properties.
The Court stated that:
“The price representations made by Hocking Stuart Richmond in respect of each of the properties were intended to and apt to create a particular mental impression in the representee, namely the “illusion of a bargain”. Hocking Stuart Richmond’s business stood to benefit from creating such an impression, although the exact calculation of such a benefit in monetary terms is difficult…
Consumer Affairs did not contend that Hocking Stuart Richmond acted with an intention to mislead or deceive. However, the manipulation of the “agent’s estimate of selling price” for the properties did demonstrate the lengths that Hocking Stuart Richmond went to in creating its enticing (but illusory and misleading) marketing web. There was a conscious decision to engage in the conduct.”
In another scathing attack of Hocking Stuart Richmond, the Court stated that they had provided no evidence of any culture of compliance with or understanding of the obligations imposed by the Australian Consumer Law.
Lessons to be learned for Agents
Be very careful when advising prospective purchasers of the potential sale price. If you advertise a price less than the Vendor’s asking price, reserve price, agent’s current estimate or alternative offer already received then you may be ‘underquoting’.
Ensure all agents are aware of their obligations under the Australian Consumer Law. Undertake regular training and if you do not have the experience in-house, seek assistance from the REIV or have a lawyer attend and provide training to staff.
As officers in effective control/owners of agencies, make sure you have clear policies on how properties are advertised and spell out what can be considered underquoting.
Whilst the conduct complained of in this case was a couple of years ago, it is clear that Consumer Affairs is attempting to stamp out the practice of underquoting and is looking for its next target.
