Victoria's Real Estate Market: A Crackdown on Underquoting
Victoria is taking a bold step to ensure a fair and transparent housing market. The state's government has announced a new regulation that will require real estate agents to disclose a property's reserve price a week before the auction. This move aims to combat the practice of underquoting, where agents advertise properties at lower prices than the estimated selling price or the owner's asking price, enticing buyers and creating a competitive bidding war.
The Allan government's reform, set to be introduced to parliament next year, is a nation-first initiative. It mandates that agents must publish the owner's reserve price at least seven days before the auction or a fixed-date sale. Failure to disclose this information within the specified timeframe will prevent the auction or sale from proceeding.
Underquoting, as defined by a Guardian Australia analysis of property sales data, occurs when the final sale price exceeds 10% of the pre-sale price guide. The analysis revealed that Sydney and Perth had higher instances of underquoting (20% and 18%, respectively) compared to Canberra, Hobart, and Darwin. Interestingly, the mismatch between the price guide and the final sale price was more pronounced for houses than for townhouses or apartments, and it was more common in auction sales than in private sales.
To address this issue, the proposed laws will require real estate agents to update all marketing materials to include the reserve price. They must also discontinue using any previous advertising that does not display the reserve price. This change follows the Victorian government's introduction of stricter guidelines for agents' selection of comparable properties to determine a home's price guide earlier this month.
The new guidelines aim to ensure that agents consider the most relevant local properties when setting a home's price before the auction, taking into account factors such as the dwelling's age and any recent renovations. Consumer Affairs Victoria can request evidence from agents regarding their choice of the three most comparable properties, and penalties are in place for non-compliance.
While Victoria's regulations are similar to those in New South Wales, where agents who underquote can face fines of up to $22,000 and the loss of commission and fees, the Victorian government believes that these measures are necessary to protect consumers. However, some experts, like Graham Cooke from Finder, argue that such regulations have had limited success, and underquoting remains a persistent issue in the real estate industry.
