Real estate agents forced to follow stricter price guidelines in underquoting crackdown

3 hours ago 3

Real estate agents who underquote property listings will be forced to follow stricter guidelines to justify their price guides after an investigation found agents have been deliberately using bogus “comparable” properties to justify the illegal practice.

Agents who set a property’s reserve price based on comparable sales must now base it on a home’s age, architectural style, renovation status, floor and land size, zoning, distance from key infrastructure and whether it has special features, such as a swimming pool or tennis court.

The government has introduced new laws to try to clamp down on underquoting.

In the past, a comparable property in Melbourne was only defined as “of a similar standard or condition” and sold both within two kilometres of the home for sale and within the past six months, as set out in statement of information requirements.

Consumer Affairs Victoria can now force real estate agents to provide evidence for how they chose comparable properties and issue fines for non-compliance.

This masthead’s Bidding Blind investigation, which uncovered systemic underquoting in Melbourne, revealed agents were abusing the requirements by cherry-picking “comparable” properties that weren’t truly comparable.

The introduction of a statement of information was a key plank of the Victorian government’s 2017 law reforms, and requires agents to provide an estimated sale price, in most instances backed by three recent comparable sales.

Real Estate Institute of Victoria chief executive Jacob Caine welcomed the reform, but said more is needed.

But agents told the investigation that they would deliberately “cherry-pick” inferior properties to the one for sale, to get away with lower price guides.

Real Estate Institute of Victoria chief executive Jacob Caine said on Thursday that sometimes nearby properties of a similar land size were rightly comparable, but the previous lack of guidelines could be abused.

“I can think of a fully renovated property next door to an 80-year-old weatherboard property on the same-sized block, exactly next door together, and there could be a million dollar price differential in the two of them,” he said. “So the new requirements provide for more specificity.”

Since September 2022, the regulator’s underquoting taskforce has monitored more than 2800 sales campaigns and identified examples of agents selecting properties that greatly differ in age, size, location, build type and renovation status or school zone, despite more suitable comparisons being available.

In the last financial year, it issued just 48 infringement notices.

In comparison, an investigation by The Age used data from 26,000 sales, finding more than half of the properties tracked sold above the top end of the price guide.

The taskforce also reviewed 60 per cent fewer sales campaigns, down to 600 from 1547 the year before.

Increasingly, property experts have also said agents are providing statements of information with no comparable sales listed, with the agents falsely claiming there are none available.

Although Caine said the new laws would be a positive step in trying to solve underquoting, he added more work was needed. He previously advocated for laws to force the disclosure of a home’s reserve price before auction, which the government has not addressed in its Thursday announcement.

Consumer Affairs Victoria director Nicole Rich said since its taskforce was established in September 2022 more than 25 per cent of complaints were about appropriately comparable properties being overlooked for homes that were not truly comparable.

“It’s a real frustration for people,” Rich told ABC Radio Melbourne. “We really feel like we need to crack down on that loophole.”

Consumer Affairs Minister Nick Staikos said tightening statement of information requirements was one of many reforms the government had made to address underquoting.

Multiple contributors to Victoria’s 2022 Property Market Review called for an overhaul of the statement of information document, among other reforms, including reserve prices to be disclosed before auction, free building and pest inspections be provided to prospective buyers, and agents to be banned from withholding sales prices.

The submissions were obtained via freedom of information laws as the Allan government has refused to publicly release the report it commissioned, which was set to consider if the laws governing the state’s property market, including underquoting, could be improved.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.