Underquoting by Agents: Get Prepared Now or Face Prosecution
Recently, TLFC Principal, Phillip Leaman brought you the blog, Real Estate Agents be Warned. Following on from that discussion, Phillip examines the new Victorian laws introduced with the aim of addressing the issue of underquoting.
The Victorian Parliament has introduced new laws specifically to tighten up and clarify the requirements for agents to ensure that underquoting is stamped out of the industry.
The Estate Agents Amendment (Underquoting) Bill 2016 has passed Parliament and is awaiting royal assent. This will be law from 1 July 2017.
There are two main areas agents need to be careful of:
- Information to Vendors
- Information to Buyers
The legislation provides greater information to buyers and more stringent requirements on how an agent determines an estimate in an agents authority. The paperwork and time spent by an agent in selling a property and complying with the new laws will increase.
The way in which agents need to assess and provide their estimate for an agent’s authority and the way in which they deal with their initial contact with a Vendor needs to change. There are strict criteria as to the use of comparable properties and what it means to be a comparable property.
If an agent knows or could reasonably be expected to know that the estimate is no longer reasonable, they must notify the vendor stating that the estimate is no longer reasonable, explain why, and provide the revised estimate. The authority must also be updated with this new estimate.
The time of internet advertising with the stated price range, “POA” is over. Agents must make a Statement of Information available with each internet advertisement and at all open for inspections (and upon request by a Buyer), which must include (by way of summary only):
- An indicative selling price
- The median selling price for residential property in the suburb sold
- Three comparable properties into account to determine the estimate selling price, you must include the address, sale price and date of sale of those properties if these were taken into consideration for the estimate in your authority.
The indicative selling price must be not lower than the price determined by four criteria (one being the price that the Vendor will not accept an offer under) and may change and need to be updated frequently during the sales process by the agent.
Consumer Affairs may ask for information and documentation to substantiate the reasonableness of estimated selling prices, any revision of statements or any advice provided to Vendors or buyers and in respect to determinations on comparable properties.
There are substantial fines which can be imposed on agents for breaches of the provisions and they are a strict liability offence. Agents will also most likely lose their commission which will need to be paid to the Fidelity Fund.
For more information please contact Phillip Leaman or a member of the Real Estates Law Team.
