Misleading Property Price Guides (Vic)
A real estate agent in Victoria is not allowed to engage in misleading conduct or representation. Specifically, an agent must not underquote the value or price of residential property in written form or in verbal communications. The advertised price must be reasonable and reflective of the expectations of the vendor and the current market value. This article explains the rules that govern pricing in real estate and the protections afforded to property buyers and consumers against misleading property price guides in Victoria.
What are misleading property price guides?
Misleading property price guides, or underquoting as it is commonly known in real estate circles, is when an agent advertises or tells someone that a property will be sold for less than the seller’s asking price. This can also occur when an agent gives a price estimate at a price point that the seller has already rejected, or in any way quotes a price that is lower than the estimated selling price.
Underquoting is a form of bait advertising, designed to hook consumers in with the false promise of a low price commodity that is not actually available. In Victoria, underquoting in real estate is banned under the Estate Agents Act 1980. Federal consumer law also prohibits false or misleading advertising and representations, including in oral or written communication.
An agent in Victoria must decide on an estimated selling price based on comparable sales in the geographical area in the last few months or years.
Statement Of Information
A real estate agent in Queensland is required to complete a Statement of Information for every residential property that they are selling. This Statement of Information must be displayed during open for inspections, inserted into online advertising, provided to prospective buyers upon request within two days, and updated if the selling price changes. This statement must provide an indicative sale price or price range for the property that is not less than:
- The agent’s estimated sale price of the property;
- The vendor’s asking price; or
- A written offer that has already been turned down by the seller.
A Statement of Information must specify the median price of a property in the suburb and provide details of three comparable properties with their address, sale price and date of sale. In the event that the agent cannot provide three case studies for comparison, they must include a statement explaining that, in their opinion, there are not three comparable property sales within the relevant time period. The relevant period under assessment may be as short as three months or as long as a year, but an assessment that was made six months or more ago is considered out of date and not reflective of current market value.
Estimated Sale Price
An agent offers an estimate of the market value of a property that is either a single price point, for example $800,000, or can give a range that is within 10% of the price, such as $800,000 to $880,000.
A comparable property is a property in a similar condition and standard. For metropolitan real estate, the comparable sales must have been sold in the last 6 months and within 2 kilometres, otherwise, the sales may be within 18 months and 5 kilometres of the property.
An agent’s estimate of the selling price may change during the course of the sales campaign, in which case the agent must inform the vendor in writing and update the sales advertising and sales authority.
When a property is set for auction, the lowest price that the vendor will sell the property for is called a ‘reserve’. The seller usually sets the reserve price, in consultation with the agent, on the day of the auction. The reserve may be higher than the advertised price, however, if the agent is informed during the campaign of a reserve price, they cannot advertise below that price. In the event that the seller does not inform the agent of a reserve price, then the agent cannot advertise the property at less than the estimated selling price.
Wording Of Price Guides In Victoria
In Victoria, a property can only be marketed as one asking price or in a 10% range. An agent cannot use symbols or words to amend a price guide, such as $800,000.00+, offers over $800,000.00, offers above $800,000.00, or from $800,000.00.
If the agent changes their estimate of the selling price, or the vendor rejects a written offer that is higher than the listed price, the agent must revise property price guides as soon as possible, and online advertising within one business day.
A consumer can make a claim or a complaint about misleading property price guides. When Consumer Affairs Victoria investigates an incidence of underquoting, they will ask the agent to justify the pricing information they have advertised or communicated to buyers. Agents in Victoria who are found to have given misleading price estimates may face penalties of more than 200 penalty units or $31,000. If an agent is found to have been using bait advertising then they may lose any commission received from the property sale.
The solicitors at Armstrong Legal can help you if you are an agent who wants to understand your liability regarding price guides, or give advice if you are a seller or buyer who believes that you have been subject to underquoting. Please contact our experienced team on 1300 038 223 for assistance with this matter or any other legal question.