Consumer Affairs Victoria (CAV) works with the ACCC to regulate the residential real estate industry in Victoria and deal with consumer complaints.

CAV is committed to working with the industry and to strengthening its enforcement activities to identify agents who flout the law.

What is underquoting?
Be aware of underquoting when buying a home
Impact of underquoting on buyers
Estate agent legal obligations
Seller obligations
CAV compliance and enforcement
CAV research into property price advertising

 

What is underquoting?

There are laws in Victoria preventing agents from making false or misleading statements about property prices including underquoting. Underquoting occurs when an agent misleads a prospective buyer about the likely selling price of a property for sale.

Examples of underquoting are when a property is advertised or quoted to a prospective buyer at a price that is less than:

• the seller’s asking price or auction reserve price
• the agent’s estimate of the selling price or
• a genuine offer or expression of interest.

Comparing the initial advertised price with the sale price is not evidence of underquoting.

If you have evidence that an agent has deliberately underquoted the selling price, please call CAV on 1300 73 70 30.

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Be aware of underquoting when buying a home

Doing your homework before you buy will help you to understand the market and be a better judge of property sales prices.

• Research the market value of property in your preferred areas by searching the internet, attending auctions, speaking with a variety of estate agents and reading newspapers for auction results.
• Use the agent’s estimated selling price as a guide only. The agent represents the seller but must be fair and honest with buyers.
• Ask the agent to justify their advertised price. They should have knowledge of the market in the area to support their estimate.
• The seller is unlikely to set their auction reserve price until the day of the auction. The reserve price decided on the day might be above the agent's original estimate.
• Don’t allow emotion to cloud your judgment and be realistic about the likely selling price.

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Impact of underquoting on buyers

The biggest impacts on buyers of price underquoting are:

• the emotional disappointment of missing out on a property that you expected to buy
• the time spent viewing and researching the property
• the cost of building, pest or other inspections.

You can take civil action against an agent if you lose money.

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Estate agent legal obligations

The law requires agents to act ethically and with integrity when advertising and providing advice to prospective buyers. An agent must not advertise a selling price for a property for sale that misleads, or is likely to mislead, a buyer.

CAV has issued guidelines to assist agents to understand and comply with the law.

An agent must not advertise or quote a price that is:

• less than the seller’s reserve price or asking price or
• less than the agent’s current estimate of the likely selling price

An agent must:

• give an accurate appraisal of the current market price of the property and
• update the advertised price if it changes during the sales campaign.

For more information see Guidelines for estate agents.

If you have evidence that an agent has deliberately underquoted the selling price, please call CAV on 1300 73 70 30.

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Seller obligations

Make sure your agent knows the price at which you will consider selling your property. In the agency authority you should include your:

• asking price, if it is a private sale or
• reserve price that may be set on the day of the auction.

Your asking or reserve price must be realistic. The agent cannot advertise your property at a figure that is less than this price.

To find out how much you property is worth:

• check online property data websites
• look in the local newspaper and estate agents' listings for similar properties
• attend auctions and open for inspections in the area
• check newspapers for properties sold in the area.

For more information see the seller's responsibilities for sale price.

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CAV compliance and enforcement

Complaints about underquoting fluctuate with rises and falls in the property market. CAV received more than 500,000 enquiries in the 2008-2009 financial year, of which over 10,500 calls related to real estate and just under two percent of these calls related to underquoting.

To achieve compliance with the law, CAV conducts random compliance monitoring exercises that involve inspecting agency documentation.

In April and July this year CAV conducted a series of blitzes on estate agents. More than 90 agencies (80 in July and 14 in April) and around 1,200 files for recently completed property sales were inspected.

CAV inspectors visited agencies in suburbs popular with first home buyers and mid level property buyers including Albert Park, Armadale, Balwyn, Bentleigh, Brighton, Brunswick, Camberwell, Carlton, Clifton Hill, Coburg, Craigieburn, Elsternwick, Essendon, Glen Iris, Kew, Malvern, Pascoe Vale, St Kilda, Surrey Hills, Point Cook and Werribee.

CAV has a range of tools that it uses against agents who underquote, including:

• warning letters
• enforceable undertakings
• injunctions and/or
• prosecutions.

The action taken by CAV in a particular case will depend upon whether there is any consumer detriment, and the seriousness of the breach. The principles and criteria that CAV uses to decide any disciplinary action are listed in CAV's Compliance and Enforcement Policy.

If you have evidence that an agent has deliberately underquoted the selling price, please call 1300 73 70 30.

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CAV research into real estate advertising

Monash University was engaged by CAV to research the accuracy of property price advertising over a two-year period from March 2005 to March 2007. Residential Property Advertising in Victoria was finalised in June 2008.

The study found that price advertising for private sales was significantly more accurate than auctions. Single sale price advertising was the most accurate method of price advertising, with the sale price averaging 4.3% less than the advertised price.

Price advertising for auctions was found to be less accurate. Price plus advertising was found, on average, to be 11.3% above the advertised price. For almost 50% of auctions where price ranges were used in advertisements, sale prices were found to be about 7.3% above the top of the advertised range.

In addition, CAV conducted research in 2008 on consumer confidence and experience in a number of market sectors including real estate. The research paper Consumer Confidence and Market Experience Study found that 431,000 Victorians participated in buying and selling residential property. Of this number, only 3% (12,000 people) reported experiencing detriment, compared with 16% for building and renovating, and 15% for telecommunications.

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