Agents raided in underquoting blitz
As inspectors raided Melbourne real estate offices to check for evidence of agents underquoting a property’s likely sale price ahead of auction, buyers advocate David Morrell suggested the practice could be stamped out once and for all by making vendors disclose their reserve price.
Consumer Affairs Victoria (CAV) conducted a blitz on real estate agents last week, making unannounced visits to nearly 60 real estate agents and inspecting about 1000 sales files of recent property transactions to check the agents’ advertising sales practices.
“Our inspectors collected information relating to the estimated selling price established by the agent, the vendors’ price, the advertised price, the final sale price and other information for analysis,” CAV director Claire Noone says.
“Any agent engaging in dubious practices will be thoroughly investigated.”
Underquoting refers to the practice whereby real estate agents quote potential buyers a lower price than the vendor would accept in order to entice more people to attend auctions.
David Morrell, from buyers agent Morrell and Koren, says underquoting is “epidemic” and it hurts buyers, sellers and the reputation of the real estate industry.
He says the Australian Competition and Consumer Commission’s (ACCC) warning of large fines is good news but adds that finding proof of underquoting will remain a problem. There’s a simpler solution, Morrell believes.
“We have one simple rule change that would end this nonsense now and forever – and it doesn’t need inspectors and it won’t need court cases,” he writes on his company’s website.
“Make the publication of reserves mandatory. Overnight, underquoting ceases. Overnight, dummy bidders disappear.
“With time, the reputation of the industry will be restored. Over time, the many, many people who are unwilling to play blind man’s bluff at auction will return.”
Recent newspaper reports quote ACCC chairman Graeme Samuel warning that agents and vendors involved in underquoting practices could face hefty fines under changes to the Trade Practices Act due to come into force next year.
However, Real Estate Institute of Australia president David Airey says the Trade Practices Amendment Bill mentioned in those media reports isn’t specifically targeted at the real estate sector.
The institute says the Bill addresses issues such as misleading conduct and false representation. It says agents who follow its guidelines on how to carry out their business in order to adhere to the Trade Practices Act won’t need to do anything different.
RP Data chief executive Graham Mirabito says heavy fines for real estate agents and vendors who consciously mislead buyers would be welcome.
He says a national set of rules would boost credibility and consistency within the industry.
“Australians have over 70 per cent of their wealth underpinned by property and they rely on their trusted advisers to provide them with transparency and relevant reports in order to make confident decisions.”
