Frequently asked questions Pages

What are we talking about?

REIV Information Officers David Dundas and Jim Lourandos address some of the current common questions from Members.

Jim Lourandos & David Dundas

REIV Information Officers

Price Quoting – avoid the pitfalls

Price quoting can be simple or complex depending on how you approach the process.

The simplicity is in the basic principle underlying the legislation - the price representation must not be misleading or deceptive. This can be found in Consumer Law, and it was under this law which many of the notable prosecutions for underquoting took place. The Estate Agents Act sections 47A to 47D sets out compliance requirements to assist agents avoid being misleading or deceptive when marketing residential real estate. The considered a comparable sale. Wherever possible the estimate on the authority must be based on the sale of three comparable properties, so finding the comparable properties needs to precede the completion of the authority.

2. The agent could not identify sales of three comparable properties, but a CAV inspector asks them to substantiate their estimate on the authority. Was it based on older sales of comparable properties but adjusted in line with price movements in the market since then, was it based on the price achieved per square metre where the value is entirely

matter becomes complex when there is an attempt to mislead or deceive.

The detail contained in the Estate Agents Act is not dealt with here as it is comprehensively covered in an information sheet on the REIV website: reiv.com.au/information-sheets. This article only looks into some scenarios that the Institute has become aware of.

1. The agent completed the authority and then searched for and selected comparables, properties that recently sold in the same range as the estimate on the authority. However, they were not like the listed property, so should not be

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or largely in the land, or was it based on a recent valuation by a qualified valuer? There is no guarantee, but these forms of substantiation may be adequate. If the agent cannot substantiate their estimate, they have a problem.

3. A potential buyer inspecting a property listed for auction pointed out to the agent that the indicative price seemed a lot lower than what similar properties in the immediate area had sold for. The agent responded, “it is different in the case of auctions”.

No, it is not different in the case of auctions, the indicative price should not be lower than the amount buyers are likely prepared to pay in the current market or the amount the vendor is prepared to accept if it is greater. The indicative price should not be influenced by the method of sale.

4. The agent found truly comparable properties which sold within the right period and used these to justify the indicative price. However, the agent is aware that the market is accelerating rapidly and clearly if the same properties were offered for sale again much higher prices would be achieved. The indicative price is therefore misleading and deceptive, so the agent should update the price on the SOI and the sale authority.

5. The vendor has directed in writing that they will not accept offers prior to auction and the indicative price is based on the agent’s estimate of what they believe buyers would be prepared to pay. Advertising doesn’t mention that offers prior to auction will not be considered. Buyers make offers above the indicative price but are informed that they will not be considered. Even though the offers are not being considered the indicative price needs to be adjusted based in what buyers have shown they are prepared to pay.

6. The agent quoted a price indicator only marginally above what the vendor paid for the property about seven years ago in a suburb which has shown strong price growth. Properties presented as comparable sold in the same price range, but the only factor common with the selected properties was the suburb location. The eventual sale price was several hundreds of thousands more than the indicative price. The property type, style, size, condition must be considered when selecting comparable sales.

In a dynamic market with low listing volume, it is even more important to ensure that the price estimation process is rigorous. Consider additional training or speak to the REIV Information Officers.

Bringing forward an auction date

Members have sought clarity on a buyer’s cooling off rights where an auction date has been brought forward. The cooling off provisions contained in section 31 of the Sale of Land Act are also described in the contract of sale jointly produced by the REIV and the Law Institute. The provisions are often misunderstood. Quick changes to auction dates as a result of the recent lockdowns means that a better understanding of the issue is required.

The property is advertised for auction and there are several interested buyers, so can I bring forward the auction?

There is no cooling off right where “the sale is by publicly advertised auction” [section 31(5)(a)], so if the auction is to be brought forward the new time and date must be publicly advertised. Nothing is stated in the Act about how long before the auction it must be publicly advertised or where it must be publicly advertised. However, if the period between the new advertising and the auction is extremely short, and/or the placement of the new advertising is extremely limited, there is a danger that in the case of a dispute a court might rule that the auction was not publicly advertised and therefore did not expunge a cooling off right.

The intent of advertising is to attract potential buyers, so a court might conclude that a very limited time between the new advertising and the auction, and/or advertising in obscure places, meant that it could not reasonably be expected to attract buyers and was therefore not legitimate advertising. It could conclude that the sale was a private sale prior to the original date of the publicly advertised auction, and if it was more than three clear business days before that date a cooling off right existed unless one of the other exclusions applied.

In conclusion there are risks associated with making this type of change. If with the agreement of the vendor, you decide to bring forward the auction date it is essential that the new auction date be publicly advertised.

Please note: This is general information and should not be treated as a substitute for reading legislation, regulations and official guidelines, or for seeking legal advice where necessary.