New legislation to curb underquoting will benefit buyers in Victoria
On August 18, the Victorian government announced changes to laws around real estate price quoting in the state. These new laws are purposed to curb misleading real estate and sale practices, benefiting buyers by ensuring they are provided with accurate information on a properties value and potential sale price.
With the market in a state of rapid change and growth these law changes could not have come at a more timely moment.
Real Estate Institute Victoria (REIV) CEO Geoff White has praised the changes, saying that they will help encourage more transparency in the market by providing clear information to both buyers and sellers.
All signs indicate that this is an improvement in the law and should bring about positive change. For those new to the property market, let’s have a closer look at underquoting, the new laws and how they will improve the market for buyers.
What exactly is underquoting?
At its most basic, underquoting is when an agent misleads buyers about the possible sale price of a home.
According to Consumer Affairs Victoria, examples of this include when a home is quoted to a buyer at a price that is less than:
- The price that the seller is asking.
- A realistic estimation of the home’s value according to the agent.
- An offer or a genuine expression of interest.
This practice misleads buyers into believing that they will be able to purchase the price at a lower cost than the reality, which in turn will increase interest in the property. This may encourage more offers, more prospective buyers attending auctions and may eventually lead to a higher sale price.
Clearly underquoting is a deplorable practice that disadvantages and misleads buyers – what will the new laws do to prevent it?
According to the Real Estate Institute of Victoria the law changes will only be applicable to residential real estate. The law changes mandate that if an agent receives a genuine offer in writing that exceeds the current estimated or qouted sales price, they must revise the estimated and advertised sale price immediately.
Secondly selling price must be provided as a single number, or a price range that falls within 10 per cent of the upper and lower end. Advertising including the phrasing ‘offers over’ are prohibited.
On an even more positive note, the law changes require that agents provide buyers with a fact sheet which includes: recent sales in the area and the price at which the agent estimates the property will sell for.
How will this effect buyers and sellers?
Misleading real estate practice benefits no one in the long run, and lead to a less stable and future-proof market. These changes should help to reduce the prevalence of such practices – helping those who are buying homes in Victoria make better choices.
Real Estate Institute Victoria CEO Geoff White explained the effect these changes will have in a recent media release:
“The changes will provide consistency in pricing of property and the information provided to both vendors and buyers,” he said.
More consistent pricing and information will lead to purchases that better suit they buyers and their needs, resulting in happier home owners. It will also reduce the likelihood of buyers overpaying for a home when they attempt to compete at an auction that is extremely busy thanks to an agents underquoting.
Lastly it will benefits sellers, in the event that an agents underquoting leads to sale of the home at a price lower than the valuation.
The timely, accurate and honest provision of information is essential to the role of real estate agents in the market and community. These law changes will help to ensure agents in Victoria uphold these standards and work to benefit both buyers and vendors wherever possible.