New legislation passed to assist homebuyers
As of 18 August 2016, new legislation has been introduced that will change the way that Melburnians are informed about the value of property. Under major reforms to the Estate Agents Act 1980, buyers will now be protected officially under the law from attempts by real estate agents to mislead them about the likely sale price of a property; otherwise known as ‘underquoting’.
What is underquoting?
Underquoting is a practice by which a real estate agent advertises a property at a price that is lower than what it actually is likely to sell for.
Underquoting is a practice by which a real estate agent advertises a property at a price that is lower than what it actually is likely to sell for, usually in an attempt to increase competition. For example, the average apartment in Melbourne, according to CoreLogic RP Data, is valued at about $530,000, and you would expect it to be sold at around that price.
However, an underquoting advertisement might list this property at $400,000+, or offers over, or something similar in wording. As a result, more people turn up to the auction or the negotiation table in order to try and obtain a bargain, only to leave disappointed. The price could even be driven up further than the actual value as a result, making buyers pay more than was necessary.
The new world of buying
Thankfully, this practice is now illegal, and real estate agents can face fines of up to $31,000 if they are found to be breaking the new laws. It is now a requirement to:
- Only advertise values within 10 per cent of the valued price
- Update the advertisement if the estimated price changes
- No longer use words such as “offers above” or “from” or the like
- Provide evidence upon request on how the home is valued at that price
The new laws have been lauded by both government and industry bodies alike.
“Buying a home is the one of the biggest decisions Victorians will make. Prospective buyers expect and are entitled to a level playing field,” said Minister for Consumer Affairs, Gaming and Liquor Regulation Marlene Kairouz.
Meanwhile, the Real Estate Institute of Victoria CEO Geoff White says that the new laws will provide consistency in pricing and information for both buyers and vendors, levelling the playing field for everybody looking to buy a home in Melbourne.
If you are interested in finding out more about the effects of this new legislation on your house-hunting process, make sure you get in touch with the expert team at Nelson Alexander. Whether it’s buying or selling, we can help make sure you get a great result.