The newly enforced changes to the Estate Agents Act 1980 are now in effect and aim to strengthen laws against underquoting properties in Victoria. Underquoting occurs when a property is advertised at a price lower than the estimated selling price, the seller’s asking price or a price already rejected by the seller.
These new laws apply to residential property sales and complement existing provisions under Australian Consumer Law. Once implemented, all Victorian real estate agents will have new obligations regarding pricing, comparable property sales, information for prospective buyers and advertising. The state government intends to send a strong message about the practice, meaning penalties for non-compliance are very severe.
Requirements of New Underquoting Legislation
Under the new legislation, real estate agents must:
– Provide an estimated selling price that is either a single figure or within a 10 per cent range (e.g. $500,000 to $550,000) and refrain from using previously common terms such as “offers above”, “plus” and “from”.
– Provide prospective buyers with a statement of information detailing three recent comparable sales and the median price for the suburb. This information has to be included with online advertising, displayed at all open for inspections and when it is requested by a prospective buyer.
– Keep buyers informed by updating marketing materials within 23 hours if the seller rejects an offer or if the price estimate changes for other reasons.
Consequences of Non-Compliance
Consumer Affairs Victoria (CAV) now has to power to force agents to prove how they arrived at an estimated price. If they are unsatisfied, agents can be found to have breached the new legislation and face fines of up to $30,000 per property, lose sales commissions and even have their licence revoked. Agents in this position can have their brand or their entire business destroyed.
The loss of sales commissions, which average around $14,000 per property, is significant as agents get fined for every property rather than just once. To illustrate the impact of non-compliance, we can look at the unprecedented court action made against a Melbourne real estate agency in 2016 as an example. In this case, CAV recommended the agency lose $200,000 earned in commissions and also be fined around $50,000 for each of the 11 properties – a total of $550,000.
The fine handed down ended up being reduced to $330,000, but the agency is still suffering from the irreparable brand damage the very public and high profile case has caused. It’s also important to note this case occurred before there was any underquoting legislation in Victoria. With the new laws, CAV now have greater powers to pursue and crack down on real estate agents.
Stay Compliant With the Latest Technology
The consequences of compliance are severe, but staying compliant to the new legislation can be difficult and many agents will not be ready in time to adapt to the new legal landscape. A complex problem requires a smart, proactive solution. Plezzel can offer such a solution through our software, which can help agents avoid brand damage and hefty fines.
Our software simplifies compliance by:
– Helps you easily create and distribute a branded Statement of Information in minutes
– Integrating sales figures into automated enquiry responses, meaning prospective buyers are always receiving accurate and updated price estimates
– Allowing agents to easily provide the required information to prospective buyers during open for inspections when requested via an app
By exploring proactive solutions using technology, your agency can avoid the dire consequences that come with breaching the underquoting laws when they come into force.