New legislation aimed at curbing underquoting is due to be passed later this year. Unfortunately the new laws are essentially a duplication of the current law.
Currently the law says that an estimated selling range must be stated on the authority between the selling agent and vendor. The selling agent cannot advertise an estimated selling price below this figure. The selling range must be based on recent and comparable sales.
Theoretically this is supposed to stop the selling agent underquoting.
Selling agents are able to get around these laws in either of two ways. Firstly, by deliberately stating a selling range on the authority that is artificially low. This then allows the selling agent to underquote the property on advertising mediums during the marketing campaign.
The second way they get around the current law is to not quote a sales range in writing on advertising material. The selling agent would then only make vague verbal representations to buyers about the likely selling price of the property e.g. “there is buyer interest around $500,000”. These verbal representations are of course deceptively low.
The essence of the new regulations is that selling agents must produce an information sheet for each property they sell. An estimated selling price must be stated on this document.
Unfortunately, there has been no real change to the law. The only change is where the estimated selling range is required to be stated.
The new regulations give selling agents the same opportunity to rort in exactly the same way that is currently occurring.
The only effective way of stamping out underquoting is for Consumer Affairs Victoria to carry out audits as to the veracity of the estimated selling range derived by the selling agent. This is achieved through comparisons with accurate recent and comparable sales data.
Astoundingly over the last 10 years there have only been a few prosecutions for underquoting despite it occurring on a weekly basis in Melbourne.
Historically the various Ministers of Consumer Affairs have been content with enacting superficial changes in regards to real estate industry legislative reform. The only real way of changing behaviour is to issue fines for substantial and deliberate incidences of underquoting.
It appears the state government has finaly run out of patience as over the last few months a number of investigations have been initiated about alleged occurrences of underquoting.