UNDERQUOTING in Melbourne’s auction market is ”more obvious than ever” despite tougher financial penalties introduced last year, with some bidders at recent auctions openly challenging real estate agents about price.
Agents are also embracing a trend of ”step quoting”, described as a more legitimate form of underquoting, where the price is deliberately quoted low at first and then increased during the sales campaign to nearer the real reserve.
In Albert Park, agency Marshall White recently refunded a first home buyer for the costs of a building inspection after it quoted $150,000 less than the reserve, as set on auction day.
Marshall White, a leading real estate agency based in the eastern suburbs, has been linked with a series of questionable quotes including one example in Armadale that was almost $500,000 less than the reserve.
However, director John Bongiorno said the agency ”does not underquote” and was a victim of its own success, having expanded from two to four offices despite the market downturn.
It sold more than 10 per cent of the value of properties sold at auctions across Melbourne yesterday.
”We sell more property over a million dollars than any other company in Melbourne, so that’s why we stand out,” he said. ”Of course our competitors want to point the finger at us.”
The underquoting debate caused one competing agent, David Lack of Biggin Scott in Port Melbourne, to draft a full-page advertisement in a local newspaper condemning ”misleading behaviour by a minority of agents”. He said underquoting created an ”uneven playing field” for agents who do the right thing and called on buyers and sellers to report such behaviour to authorities.
Buyer’s advocate Christopher Koren said underquoting was less obvious in a healthy market but the cover of some underquoting agents had been blown this year because so many properties were being passed in, making it ”more obvious than ever”.
”One of the tragedies about underquoting is the complete waste of time for purchasers who set their hearts on the property, get their banks organised, pay for inspections and then all of a sudden realise that they were never even close,” he said. ”It’s not fair.”
Consumer Affairs Victoria said it had pursued three agents for underquoting since the introduction of harsher penalties for misrepresenting the price of a property in January last year, with maximum fines increased from more than $70,000 to $140,000 for individuals and from $220,000 and $1.1 million for corporations.
The prosecuted agents in Footscray, Sunbury and Bentleigh paid a total of $25,000.
Albert Park agent Greg Hocking said regulators were ‘‘either under resourced or under inspired’’ and should ‘‘pro-actively investigate the scores of examples each weekend’’ instead of waiting for a complaint.
‘‘A couple of agents are quoting well below the market, not just 10 or 20 per cent below but even 30 cent sometimes,’’ he said.
‘‘There will always be a few slips from time to time where you undercook things because a group of buyers on the day pursue a property, but they are so infrequent in this market. When there’s a consistent line, that’s the difference.’’
Buyers advocate Mal James said ‘‘step quoting’’, where agents quote conservatively when a property is first listed, and then increase the estimate progressively during the campaign, had become accepted as a normal practice during the past few years.
‘‘A number of agents in the eastern suburbs have been very successful with it and other agents are now copying their methods,’’ he said.
The method of updating the price is used legitimately when there is a change in the seller’s asking price, but could also be abused to bait buyers, he said.
Consumer Affairs Victoria received 15 complaints about underquoting last financial year, 71 per cent less than the previous financial year.
The Real Estate Institute of Victoria said Victorian agents had a very high rate of compliance with the law, under which the sale price does not need to relate to the advertised price.
‘‘You can’t determine whether they’ve breached the law by comparing the pass in price or sale price with the advertised price, because the agent doesn’t always know what the vendor is willing to accept,’’ a spokesman said.
Source: “The Age”