Estate Agents Look Out! Be sure to understand new pricing law
By Joshua Beaver, Lawyer, MST Lawyers
Amendments to the Estates Agents Act 1980 have recently become law in Victoria. The laws are targeted at the perceived practice of underquoting by agents, a practice which serves to undervalue the selling price of a given property and in turn misleads prospective buyers.
The new law requires agents to calculate the estimated selling price of a property more accurately. The legislation also deals specifically with underquoting; preventing agents from making any statement that the selling price (or likely selling price ) is lower than any offer to purchase the property already rejected by the seller. The law places responsibility back onto the agent to act in an ethical manner towards the buyer.
If the estimated selling price of a property is revised, the agent has one business day to take all reasonable steps to remove the original price from any internet advertisement and ensure that the advertised price is not lower than the revised estimate.
The addition of this new requirement does not derogate from the obligations imposed on agents under the Australian Consumer Law (“ACL”) (which includes, for example, misleading and deceptive conduct relevant to every business). All agents must remember this given the recent case involving the underquoting practices of Hocking Stuart Richmond, which was successfully pursued by CAV for misleading and deceptive conduct and ordered to pay over $400,000.
Agents, therefore, need to be aware that CAV can pursue them through both the amendments of the law and the broader provisions of the ACL, such as misleading and deceptive conduct. The new legislation will strengthen CAV’s hand and one would imagine investigations into underquoting, rather than plateauing, will only grow from here.
A Consumer Affairs Victoria (CAV) report has found that 126 of 200 audited properties sold above the estimated selling price quoted by the real estate agent. Of the 200 properties, 60 sold for less than 10% more, 52 sold for between 10% and 20% more and 14 at greater than 20% of the original estimated price.
Although the sample was relatively small (CAV only audited 200 properties when more than 40,000 auctions were held in metropolitan Melbourne during that time) the findings of CAV’s report indicate an increased trend in underquoting.
Franchisors need to be aware of their obligations under the amendments and consider reviewing their quoting policies. Franchisors must be confident that franchisees are complying with the legislation.
Ultimately franchisees must take steps to prepare themselves for these changes. In failing to do so, the consequences, both financial and reputational, will be serious.