As the old saying goes, “Quote them low, watch them go!”
Underquoting is the practice of misleading a buyer about the likely sale price of a property, and is the issue being taken on by new Victorian Legislation changes coming into effect on 1 May 2017.
Over the past decade, Victoria has seen property prices increase considerably.
House & Unit Median Values
Of course, there are many factors that influence property prices and is generally determined by market forces.
The issue being tackled here is not housing affordability, but the act of underquoting.
So, what is Underquoting?
As defined by Consumer Affairs Victoria (CAV), underquoting occurs when an agent misleads a prospective buyer about the likely selling price of a property. Underquoting may also occur 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.
How are Consumer Affairs Victoria combating Underquoting?
Following an increasing volume of Consumer complaints, CAV established Taskforce Vesta. The taskforce examined a number of properties for sale across Victoria, monitoring 200 properties online and once sold inspectors visited the selling agent’s office to examine sales files and other documentation, looking for underquoting breaches. Of the 200 properties, 176 were eventually sold, with:
- 27% sold within the agent’s estimated selling price,
- 30% sold between 0.1% and 10% above the estimated selling price,
- 26% sold between 10.1% and 19.9% more than the estimated selling price,
- 7% sold at 20% or more than the estimated selling price, and
- 10% sold at less than the estimated selling price.
And so, on May 1st 2017, new laws aimed at curbing underquoting will come into effect.
The changes to the Estate Agents Act 1980 will require agents to provide prospective buyers with an information statement about the property for sale, which includes:
- three recent comparable sales (if metropolitan Melbourne, these properties must be sold within the last 6 months and located within 2 kilometres of the property for sale, and if outside of metropolitan Melbourne, these comparable properties must be sold within the last 18 months and located within 5 kilometres of the property for sale.),
- an indicative selling price, which may be expressed as a single price (eg $500,000) or a range of up to 10% (eg $500,000 – $550,000), and
- the median price for the suburb.
The new laws will also:
- ban advertising price ranges of more than 10%,
- ban words or symbols in advertising such as ‘offers above’, ‘from’ or ‘+’, and
- require advertising to be promptly updated if the seller rejects a higher written offer to purchase the property, or the agent’s price estimate changes.
Estate agents caught engaging in underquoting will face penalties of more than $31,000 (the equivalent of 200 penalty units) and risk losing their sales commissions. CAV will have new powers to require agents to demonstrate how they arrived at a property’s estimated selling price. Source: CAV.
Creating a Statement of Information with CoreLogic
As part of this process, Consumer Affairs Victoria has worked with CoreLogic to form the guidelines for creating a Statement of Information.
CoreLogic have been working on a reporting tool which will allow you to find Comparable Sales and create a compliant Statement of Information. We’re working hard to ensure this tool will be ready in time for the 1st of May, when all new listings will require a Statement of Information.
Generate a Statement of Information Report with Signature by CoreLogic
Sample Statement of Information by CoreLogic
Keep an eye on the Solutions Blog for updates as we get closer to launching the new tool. You can also reach out to your account manager or trainer if you have any questions, or contact Customer Care on 1300 734 318.