BIG ANNOUNCEMENT – Government To Get Serious On Underquoting PART TWO
Welcome to PART TWO of New Underquoting Laws For Victoria. Today I will focus on how an agent will be allowed to advertise if this legislation is passed, why the current system is a joke and what happens if an offer is rejected.
Pricing A Property
Currently the most common form of underquoting advertising is using a PLUS price. That is, a property is advertised at $500,000+ when the vendor actually wants to $600,000 for their home. Some agents consistently advertise using a plus price when the reserved price is 20-30% above this price. It is not fair on buyers and actually puts the vendor at risk if the perception is the home is worth less than it is.
Under the new rules agents will no longer be able to get away with this open price strategy. Instead they will have to give a range of no greater than 10% of which the ‘reserved price’ falls within this range. The other pricing method that does not seemed to be addressed in the media release is by having no price at all. This may remain legal and if so more and more properties (and the trend has already started) will be left with no price forcing a buyer to pick up the phone or email to find more information.
It is not ideal, but legislation on pricing has always been soft and so they are likely to leave this options open to agents almost as some sort of a compromise. Speaking of soft, here is why this has become a problem in the first place.
Recently the director of Consumer affairs Ms Garrett directed Consumer Affairs to inspect 200 auctions in 2015/2016. SO WHAT? There are 1,200 auctions being conducted this weekend alone. Agents blatantly break the current rules (but not the law). What is the difference between rules and law you may ask? In a word loopholes, and agents figure them out pretty quickly. Let’s hope these laws are passed and finally close some of those loopholes.
Making An Offer
Again this is already a ‘rule’ but it is never enforced. That is, if a property is advertised in a range of $500,000 - $550,000 and an offer is made at $560,000 and rejected that the new range has to be $560,000 - $616,000. In other words, if a written offer is received and rejected, the range clearly is not below that figure and so must be stated as the absolute minimum.
Under the new rules if the above offer is made per my example it leaves a clear paper trail that a law has been broken. Currently agents argue that the vendor did not tell them their price or that the market moved. They will have to be more convincing going forward to Consumer Affairs, that is if the government finally gets serious.
What thoughts do you have on underquoting?
14th March, 2016