Misleading Property Price Guides (ACT)
Real Estate Agents in the Australian Capital Territory operate under strict regulations designed to prevent misrepresentation or misleading conduct. A real estate agent is legally obligated to act fairly, honestly and professionally with all parties to a transaction. The agent must not practice deception or give misleading advice. One of the areas that an agent can run into trouble is through giving misleading property price guides or underquoting a property in advertising, or verbal and written communication. In the ACT, a property price must be a reasonable reflection of current market value and the expectations of the seller. This article outlines the statutory regulations that govern property price guides and afford consumer protection to buyers and sellers in the ACT.
Under consumer law, in order for advertising to be considered fair, an advertised product must be available at the advertised price for a reasonable length of time in a reasonable quantity. “Bait advertising”, where a business advertises an artificially discounted price to increase interest, is a problem in many areas of commerce. Businesses will advertise an item at a low price, and then when a buyer arrives at the physical or online store they will find that the discounted item is no longer available, and they are directed towards other “similar” but more expensive items.
Regulation of Real Estate Agents
Real estate agents in the ACT are subject to regulation from a variety of state and federal legislation, including the Competition and Consumer Act 2010 (Cth), Civil Law (Sale of Residential Property) Act 2003, Civil Law (Sale of Residential Property) Regulations 2004, and the Agents Regulation 2003. Relevantly, under the Agents Act 2003, an agent commits an offence if they publish an advertisement or give out information that the agent knows is false or misleading. Moreover, an agent also commits an offence if they are careless of the accuracy of the advertisement, or fail to provide information that causes the advertisement to be misleading.
Misleading property price guides and Underquoting
Underquoting is the act of misleading a prospective buyer about the probable selling price of a property on the market. This can lead buyers who cannot afford the selling price to expend time, money and energy on a fruitless effort to secure a property. In a hot property market, this can be especially frustrating for first time buyers who are unfamiliar with the vagaries of the real estate market.
In 2016, Access Canberra surveyed properties scheduled for auction in the ACT and found that the agents for almost half of the surveyed properties were practicing underquoting. This can be a particular problem with auction price guides, as an auction can stay at a low price or surge beyond expectations even if there are only two motivated buyers competing for the particular property.
One of the reasons why underquoting is a problem in real estate is that an agent’s sole focus is on achieving the best outcome for their clients: the sellers. The agent is not allowed to tell prospective buyers the lowest price that the seller will accept, in fact, their object should be to encourage the buyer to increase their offer on the assumption that the seller would not accept any less. As such, it can be difficult for an agent to balance the desire to achieve the best price for their client with the need to avoid underquoting and misleading potential purchasers.
When Are misleading property price guides not Underquoting?
In the ACT, there are fewer restrictions on agents when making property price guides than in other Australian jurisdictions. For instance, in the ACT a reserve price may be set on the day of the auction. In fact, a real estate agent in the ACT may give an initial price guide for a property going to auction that bears little resemblance to the final selling price. This is sometimes the result of fierce bidding on the day that exceeds the reserve. Even with properties that are listed at a set price, it can be difficult to make an accurate assessment of the final selling price, as the shortage of detached houses in Canberra creates a highly competitive market and inflated sale prices.
When Access Canberra receives a complaint about an incidence of underquoting, they will investigate the agent’s behaviour and ask them to justify their advertising or representation of the property at the particular price point. The penalties for a violation of the Agents Act 2003 may be a fine for an individual of up to $220,000.00 and for a corporation up to $1.1 million.
Armstrong Legal can provide any advice that you need to avoid misleading conduct as a real estate agent, or help you make a complaint about conduct that you feel is a contravention of consumer law in the ACT. Please contact the team on 1300 038 223 for advice on this issue, or any other commercial, contract or property law matter.