Real Estate Agencies Face Scrutiny Over Property Underquoting Practices

Two more Melbourne agencies admit to underquoting, highlighting ongoing regulatory challenges in the housing market.

The practice of real estate underquoting, where properties are advertised at a price below their likely selling price, continues to draw attention in the Melbourne property market. Two more agencies, Hocking Stuart Richmond and O’Brien Croydon, have recently admitted to engaging in this conduct, according to reports. This development underscores the challenges faced by regulators in ensuring transparency and fairness for prospective homebuyers.

Understanding the Underquoting Phenomenon

Underquoting is a practice that can mislead potential buyers about the true cost of a property. By advertising a home at a lower price, agents may aim to attract a larger pool of interested parties and encourage bidding wars that ultimately drive the sale price higher. While some may view this as a marketing strategy to generate interest, consumer protection advocates and regulatory bodies often deem it deceptive and unfair to buyers who invest time and money in pursuing properties based on advertised prices.

The issue has been a point of contention in the Victorian property market for some time, with government bodies and industry associations working to address instances of underquoting. The recent admissions by Hocking Stuart Richmond and O’Brien Croydon suggest that the practice, despite increased scrutiny, persists.

Recent Admissions and Regulatory Response

Reports indicate that one of the admitted cases involved an agent allegedly describing the underquoting practice as “just a little (marketing) ploy” intended “to get people through the door.” Such statements, if accurate, could shed light on the mindset of some individuals within the industry who engage in these practices. Regulatory bodies in Victoria, such as Consumer Affairs Victoria, are responsible for investigating and taking action against agents found to be in breach of advertising standards and consumer protection laws.

The penalties for underquoting can vary, often including fines and potential disciplinary actions against the real estate agents involved. These measures aim to deter future occurrences and reinforce the importance of accurate property advertising. However, the repeated instances of agencies admitting to underquoting highlight the ongoing nature of this challenge and the need for continued vigilance from both regulators and consumers.

Impact on the Property Market and Consumers

For prospective homebuyers, underquoting can lead to significant disappointment and financial strain. Buyers may spend considerable time and resources on property inspections, research, and preparing bids, only to find that the actual selling price is substantially higher than initially advertised. This can erode trust in the real estate industry and create an uneven playing field for buyers. Furthermore, it can skew market perceptions, making it harder for buyers to accurately gauge property values.

The real estate industry itself faces potential reputational damage when such practices come to light. Maintaining consumer confidence is crucial for the healthy functioning of the property market. While many agents operate with integrity, isolated incidents of underquoting can cast a shadow over the entire profession.

Perspectives on Underquoting

Industry bodies often acknowledge the importance of transparency in property advertising. Efforts have been made to educate agents on their obligations and the potential consequences of misleading advertising. However, opinions may differ on the extent to which underquoting is a systemic issue versus isolated misconduct. Some might argue that market dynamics and the competitive nature of auctions can naturally lead to prices exceeding initial expectations, while others maintain that deliberate underquoting is a distinct and unethical practice.

Consumer advocacy groups consistently call for stricter enforcement and greater penalties to act as effective deterrents. They often emphasize the vulnerability of first-home buyers and those less experienced in the property market, who may be more susceptible to the misleading impressions created by underquoting.

Navigating the Property Market as a Buyer

Given the ongoing concerns surrounding underquoting, prospective buyers are advised to exercise caution and conduct thorough due diligence. It is recommended to:

• Research recent comparable sales in the area to establish a realistic price range.
• Attend multiple auctions and open-for-inspections to gauge market sentiment and actual selling prices.
• Engage with a trusted buyer’s agent or property advisor who can offer independent valuation advice.
• Be wary of properties advertised significantly below comparable properties in the same locale.
• Understand that advertised prices, particularly in auction campaigns, are often indicative and subject to change based on market demand.

Consumers who suspect underquoting are encouraged to report their concerns to Consumer Affairs Victoria, the state’s consumer protection agency. This feedback assists in identifying trends and targeting investigations.

Key Takeaways for Consumers

• Be aware that underquoting involves advertising a property below its likely market value.
• Always conduct your own research on comparable sales to verify advertised prices.
• Seek independent advice from property professionals if unsure about a property’s true value.
• Report suspected instances of underquoting to the relevant consumer protection authorities.

The ongoing efforts to curb underquoting in the Melbourne real estate market highlight a commitment to fostering a more transparent and equitable environment for all participants. Buyers and sellers alike benefit from accurate information, which underpins confidence and stability in property transactions.

References:

Herald Sun: Two more agencies admit underquoting