A Timely Reminder of the Underquoting Laws
It has been 8 months since the State Government incorporated the Underquoting Laws into the Estate Agents Act 1980 (Vic).
During that period Consumer Affairs Victoria (CAV), the Regulatory Body that governs real estate agents, has investigated numerous claims of possible breaches of underquoting laws and many real estate agents have been found wanting in terms of overall compliance.
Given the legislation’s strict requirements and that most breaches attract a 200 penalty unit payment (which presently equates to over $31,000.00), it is worthwhile noting some key aspects of the Underquoting Laws.
One key requirement for a residential agent prior to being appointed is to provide the prospective vendor client with a reasonable estimate of the selling price of the property either as:
- a single amount; or
- a range (where the difference between the upper and lower limits does not exceed 10%).
The estimate provided must be based on the sale price of 3 comparable properties sold within the preceding 6 to 18 months, depending on the location of the property to be sold .
On appointment, a Statement of Information must be made available to any prospective purchaser and displayed at any inspection of property. The Statement of Information must be in the prescribed form and:
- include an indicative selling price for the residential property (again, to be expressed as a single amount or a price range – with the lower limit of that range not being less than the single amount or lower limit contained in the engagement signed by the vendor);
- contain a medium selling price for residential property sold in the same suburb during a period of not less than 3 months and not more than 12 months before the Statement is prepared;
- specify the type of property the medium selling price relates to; and
- include the addresses, sale price and dates of sales of the 3 comparable properties which the agent took into account to determine the estimate of the selling price.
The Statement of Information must be updated at any time where the price in the Statement is less than:
- the price proposed in any written offer to purchase the property which an agent knows, or “could reasonably be expected to know”, that was rejected by the vendor ; or
- an amount the vendor has informed his/her agent that he/she would accept as the selling price.
In either scenario, steps must be taken within one business day to update the Statement of Information and any advertising material relating to the Property which contains the old indicative selling price. Again, failing to do so could result in a substantial penalty.
Whilst the Laws refer to the concept of a “written offer” – the question must be asked, what exactly constitutes a written offer?
Agents will know that written offers (and expressions of interest) come in various forms, even via text message. Offers can also be conditional on finance or other events occurring. It is important to obtain advice from a lawyer to work out what an agent must do to comply with the Underquoting Laws concerning offers.
If we have learnt anything over the last 8 months it is that the Underquoting Laws are here to stay and could become even more rigorous into the future.
If you have any questions in relation to the Underquoting Laws please contact a member of our Property Team or Litigation Team.
