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Key points
- The number of underquoting inquiries received by Consumer Affairs grew year-on-year to 1650, up from 1450.
- The value of fines grew to $520,000 in 2022-23, up from $360,000 in the 2021-22 financial year.
- A property could be considered underquoted if it’s advertised at a cheaper price than the estimated selling price or less than the seller’s asking price.
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Dion Oryzak was scouring Balaclava to buy a home and studying local property price guides, so he knew when one looked too cheap.
The three-bedroom house was advertised for sale with a price guide of $2.1 million to $2.31 million, much lower than he expected, so he made an offer of $2.2 million.
Dion Oryzak’s experience is a common story for frustrated Melbourne home buyers.Credit: Simon Schluter
The real estate agent for the property said the vendor would proceed to auction. On the day, the vendor’s reserve price was $2.5 million and the house sold for $2,725,000.
Oryzak complained to Consumer Affairs Victoria, but only received a generic reply.
It’s a common story for frustrated Melbourne property buyers, who are raising concerns about the prevalence of underquoting, the complaints process, and the legal loopholes that allow questionable behaviour.
In practice, underquoting aims to attract more buyers to an auction via an unrealistically low price guide, but can waste the time and money of buyers who attend inspections, arrange finance or pay for building inspections for properties they later realise they could not afford.
Underquoting can occur when a property is advertised at a price that is less than the estimated selling price, is less than the seller’s asking price, or has already been rejected by the seller.
But it is hard to prove. Especially when the property market was booming due to rock-bottom interest rates in autumn 2021, when the Balaclava auction took place. A stronger-than-expected sales result is not necessarily underquoting. And buyers who make a complaint are often unsatisfied by the response.
“They didn’t say anything about whether they’re going to take action, they just brushed it off, I have no further visibility of what they did after that, if anything,” Oryzak, 40, who is an actuary, said of the response he received from Consumer Affairs.
“They didn’t even acknowledge, necessarily, if the complaint had merit.”
That auction lays bare a string of issues.
Agents must update price guides if the vendor rejects an offer for being too low. But it is not unusual for buyers to be told that vendors are not accepting offers and are proceeding to auction.
A price guide must be a single price or a range no wider than 10 per cent, but there is no obligation for an agent’s estimated selling price and the vendor’s reserve price to be the same.
Buyers feel the practice of underquoting is pervasive through the real estate industry. Credit: Paul Rovere
The Age has seen sale authority documents where the reserve price was listed as “none disclosed”– a practice that allows vendors to legally set a higher reserve on auction day than the price guide. This practice was raised in a 2022 government review, the results of which have not been made public and remain under consideration.
The Age has recently covered other auctions where the vendors’ hopes ranged between $10,000 and $300,000 above the advertised price guide.
Although the Balaclava auction was more than two years ago, Oryzak has scant confidence that the state government’s $3.8 million underquoting taskforce has changed the landscape since.
“The regulation itself is toothless,” he said. “More money’s not going to fix it unless the regulations are changed to have more teeth.”
Victoria’s Consumer Affairs Minister Danny Pearson.Credit: Martin Ollman
When contacted by this masthead, Consumer Affairs Victoria referred enquiries to Consumer Affairs Minister Danny Pearson.
In response to detailed questions, a spokesperson for Pearson said in an emailed statement: “We expect all estate agents to follow the law and accurately represent the property they are selling.
“A dedicated taskforce backed by $3.8 million has already been launched in a blitz to combat underquoting and other breaches of consumer property laws.” The taskforce has tracked hundreds of sales campaigns, often after receiving information from the public.
More than 1650 inquiries about underquoting were made to Consumer Affairs in 2022-2023, up from over 1450 the previous year.
The volume of fines has been rising, to 48 fines totalling more than $520,000 in financial year 2022-23, and 37 official warnings were handed out to 29 real estate agencies.
A year earlier, 46 fines totalling more than $360,000 and 157 warnings were given to 86 agencies.
The maximum fine for underquoting is $38,462 and a loss of commission, but the average over the past financial year works out to $10,833. This compares with a typical commission payable of about 2 per cent, or $20,000 on the sale of a $1 million home.
The figures mask the depth of feeling among buyers, who also notice outdated comparable sales used to justify low price guides or guides with no comparable sales at all.
Bill Bariamis had been helping his daughter buy a property in Melbourne’s south-east earlier this year. When asked about the extent of the problem of underquoting, he fires up.
“Extremely widespread. I’m hard-pressed to find a property that isn’t underquoted, across months and months and months,” Bariamis said.
“They’ll say anything, the bulk of them. Anything goes because the consequences aren’t there.
“They get fined, whoop-de-doo. If you pull in $40,000 in commission, you pay a $2000 fine; it’s nothing.”
Many buyers say the state government doesn’t do enough to police the illegal practice. Credit: Wayne Taylor
Bariamis became so incensed he complained to Consumer Affairs – but like Oryzak, was dissatisfied with their response.
“What happened?” he laughed. “Two thirds of sweet F-A.”
“After I lodged my complaint which was detailed … [Consumer Affairs Victoria’s response] was just a stock email they pump out to every schmuck.”
Chamberlain Property Advocates’ Wendy Chamberlain gave up complaining about underquoting, calling it a “complete waste of time”, after one incident when investigators told her to make a complaint directly to a real estate agency.
“It falls into a black hole, and they don’t seem to care, they point you back to the agents to deal with them,” she said.
She had made an offer of $1.3 million on behalf of her client on a Croydon house guided at $1.2 million to $1.25 million.
Chamberlain said the agent did not update the price guide until 5.30pm on a Friday before a Saturday morning auction.
Property Home Base director and buyer’s agent Julie DeBondt-Barker similarly said nothing had ever eventuated from her complaints to Consumer Affairs.
Some in the industry have given up on complaining completely. Credit: Jessica Shapiro
“I’ve given up because they don’t do anything,” DeBondt-Barker said. She said some agents don’t know what a seller’s reserve price will be until they pause midway through an auction and check.
Property Mavens buyer’s agent Miriam Sandkuhler said she had made 10 complaints to Consumer Affairs over the past 10 years about underquoting.
But she said in response there was little or no correspondence, other than an email to confirm the complaint had been received.
“I have sought further information from [Consumer Affairs] asking what would happen to my complaints, and was told unless there are several complaints about a particular agent or agency, they won’t do anything,” Sandkuhler said.
Sandkuhler said there weren’t enough staff at Consumer Affairs to investigate complaints received, even with the new taskforce.
Veteran top-end buyers’ advocate David Morrell, of Morrell and Koren, said he makes three to four complaints a week.
Morrell said he rarely felt Consumer Affairs responded adequately. Each complaint would receive the standard form response, and when Morrell would ask for updates, they would refuse to provide any information as it was under investigation.
“We’ve got a taskforce, but the taskforce is useless,” he said.
Christopher Sallmann does not report underquoting, despite having encountered it regularly.Credit: Justin McManus
Some buyers do not trust the system enough to make complaints in the first place.
Ashburton retiree Christopher Sallmann, a scion of the prominent, Richard Ellis-linked Melbourne real estate family, has been involved in the transaction of eight properties in the past three years, sometimes helping friends buy and sell or as a vendor.
He said a lack of consequences and visible enforcement discouraged him from complaining.
“Several agents had been found guilty of doing this regularly, and they’d been fined $2000. That’s ridiculous. That penalty has no kind of ring to it at all.”
Retired real estate agent Arch Staver said the pervasive underquoting in the Melbourne property market was damaging to his old profession.
Former real estate agent Arch Staver.Credit: Eddie Jim
Staver said that underquoting had made his career more difficult at times, when some buyers would assume properties were under-quoted, and mentally count themselves out of the competition.
“The buyers would automatically take a quote of $1.4 million to $1.5 million and say ‘oh that’s going to make $1.7 million’ and discounted themselves,” he said.
State opposition spokesman for consumer affairs Tim McCurdy said the number of fines issued was low and that this showed the state government wasn’t serious about dealing with underquoting.
Opposition spokesman for consumer affairs Tim McCurdy.
“That task force they set up last year, they came out with a bang, and they set it up but have we got any bang for our buck?” he said. “The number of people who had infringement notices and penalties does not reflect that anything has changed in the past 12 to 18 months.”
McCurdy, himself a former real estate agent, said that although there was genuine underquoting, the issue was in some ways overblown. He said he wanted to see buyers and sellers better educated about underquoting and fines increased.
McCurdy called on the state government to release the property market report and its recommendations immediately.
Real Estate Institute of Victoria chief executive Quentin Kilian defended the industry, arguing that underquoting was a problem, but that it was not rampant.
Kilian said the shortage of properties for sale this year meant houses were selling for well above their price guides and may lead some to believe that agents had under-quoted when it was just the market setting prices.
He said it was fair for vendors to set their reserve on auction day, and that the market can shift dramatically during a sales campaign.
The recent figures from Consumer Affairs proved that underquoting wasn’t widespread as there had been only 48 fines and 37 official warnings issued to 29 real estate agencies, he said.
“To put that into perspective we have more than 5000 real estate agencies that held more than 31,000 auctions in the past year, so it is a problem, it’s just not rampant or rife.”
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