Living Property Blog

A new era in property valuation

by John Piccolo

What exactly is underquoting? Underquoting occurs when an agent misleads a prospective buyer and seller about the likely selling price of a property. For example, an agent records an artificially low estimated selling price on the authority (the document that gives the agent permission to act on the seller's behalf) when they believe the property to be worth more.

These changes to the estate agents act are the most significant since the changes to the auction system in 2004.

The reason for the new legislation is due to the high number of complaints received by consumer affairs from consumers dissatisfied with the level of accuracy in property appraisals and how that information disseminates the marketplace

Underquoting may also occur when a property is advertised or quoted to a prospective buyer at a price that is less than:

- the seller's asking price or auction reserve price
- the agent's estimate of the selling price
- a genuine offer or expression of interest

It is important to note that a property selling above its advertised price is not necessarily evidence of underquoting.

New underquoting laws were passed in the Victorian Parliament in November 2016. As of May 1st 2017, the changes to the Estate Agents Act 1980 will require agents to provide prospective buyers with an information statement about the property for sale, which includes:
- three recent comparable sales
- an indicative selling price
- the median price for the suburb.

The new laws will also:
- ban advertising price ranges of more than 10 per cent
- ban words or symbols in advertising such as 'offers above', 'from' or '+'
- require advertising to be promptly updated if the seller rejects a higher written offer to purchase the property, or the agent's price estimate changes.

The changes will apply to residential property transactions - private sales and auctions not commercial/industrial or rural. Estate agents caught engaging in underquoting will face penalties of more than $31,000 and risk losing their sales commissions.
"Changes to price quoting announced by the Government are a significant step forward and bring transparency and consistency to property transactions," the Real Estate Institute of Victoria said.

John Piccolo CEO Tel: 03 9805 1111

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