What are the obligations of real estate agents?
The amendments to the Act took effect on 1 May 2017 and introduce a range of new measures against underquoting in residential property sales. The measures will now include the following:
- Property selling prices and likely selling prices must be specifically advertised either as a single price or price range, not "from $X", "$X+" or similar
- Properties must not be advertised with a price range exceeding 10%
- Requirement in all residential property sales for real estate agents to prepare an information statement, to be included with any online advertising of the property, at inspections and upon request of a prospective buyer within 2 days of the request, which discloses:
- an indicative selling price
- the median selling price of the suburb
- details of 3 comparable properties sold within the previous 6 months (or 12 months for properties outside metro Melbourne) that the agent reasonably considers to be most similar with regard to the standard of the properties, their location, the time of sale of the properties, and other factors as required by the Director of Consumer Affairs Victoria (CAV)
- Agents must revise the above information statement with respect to the indicative selling price if the seller rejects a written offer for a higher priceIf there are any changes to the information statement, it must be updated promptly wherever it has been made available
- By written notice, the Director of CAV can require agents to substantiate the estimated selling price or the content of the information statement within 21 days after notice is given.
How is Consumer Affairs Victoria investigating underquoting by real estate agents?
Data released by CAV shows that the number of complaints received relating to underquoting have significantly increased over recent years. In 2014-2015, 158 complaints were received. This number multiplied to 339 complaints in 2015-2016.
In 2015-2016, a new CAV taskforce was established to investigate 200 select properties from first listing until post-auction. The taskforce targeted properties in 'boom areas' with either high volumes of auction sales or the highest median sale prices.
CAV pre-emptively monitored auctions and sales of these properties. If any property was sold for a significantly higher price than its estimated selling price, CAV would undertake an inspection of the selling agent's office to examine sales files and other documents for possible breaches. CAV also investigated property sales based on complaints received from the public, regional officers and other sources.
As a result of the taskforce, 13 investigations were either launched or continued. CAV issued 20 warning letters and one infringement notice. Out of the properties that sold, a third of the properties sold for more than 10% of the estimated selling price.
Non-compliant real estate agents have faced significant penalties. The Federal Court of Australia penalised one real estate agency $330,000 after a CAV inspection of the agency's office revealed underquoting on 11 properties.
What should real estate agents do?
Real estate agents need to be proactive in complying with the new measures, noting that they are now in effect. There are basic steps real estate agents can take to reduce their risk of non-compliance:
- Immediately review all current advertising to ensure the price range does not exceed 10% and no prohibited words or symbols are used
- Consider including disclaimers in advertising for additional protection, such as with respect to changes to the information statement which have not yet been implemented across all advertising
- Include protective conditions in sales authorities to limit liability for breach of the Act
- Train all staff as to the new measures so they understand their obligations
- Set new policies for staff as to operating and conducting themselves in communicating with sellers and prospective buyers during pre-listing appointments and selling campaigns
- Appoint a Risk and Compliance Manager to oversee changes to the operation of the real estate agency and ensure ongoing compliance
How can Sharrock Pitman Legal help?
We have an Accredited Specialist in Property Law, and have extensive experience and expertise in assisting customers with their property matters. If you need advice, please contact us and it would be our pleasure to assist. Call Sharrock Pitman Legal today on 1300 205 506.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
Andre is a Principal of Sharrock Pitman Legal.
He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria). He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.
