Legislative changes mean greater transparency for property prices

By Patrick Brady AAPI
National Director

The Australian Competition and Consumer Commission put real-estate agents on notice in May following reports some agents are engaging in deceptive and misleading conduct.

The industry watchdog announced fines of up to $1.1 million for real-estate companies and $220,000 for individual agents and vendors proved to be engaging in misconduct. The move comes as part of changes to Component Pricing under the Trade Practices Act.

The crackdown follows increasing reports from the public regarding under quoting and deceptive marketing tactics, often in relation to auction sales.

According to the rules of Component Pricing all advertising must correctly represent the good or service on offer to enable consumers to make an informed decision. Based on this, advertised properties should promote a single minimum total cost that the property could reasonably sell for. In recent weeks, this change has led to the modification of marketing practices for many agents, where many advertised properties no longer display a price.

When forming an appraisal of the value of a property agents commonly rely on comparable sales data and knowledge of a suburb, however some agents have responded to criticism regarding under quoting, saying, that it is difficult to place a price on a property in a rising market, stating increasingly strong demand driven by population growth and the currently low level of available stock often renders final sale prices unpredictable.

According to REIA and Trade Practices Act guidelines, agents should arrive at a value based upon reasonable evidence and one that reflects the value or range within which the vendor is willing to consider offers. The information on which this appraisal is based must also be made available to the vendor upon request.

Prospective purchasers, however, should not rely solely on agents to establish a value range. They must thoroughly research their price bracket, locality and the positive and negative attributes of the property and suburb. Attending auctions prior to selling and buying, allows purchasers to gauge the market they intend to buy into.

Chris Plant, the Victorian President of the Australian Property Institute approached the ACCC in July offering the provision of a pool of appropriately qualified property valuers to independently asses the value of a property. This proposition would mean greater transparency in pricing for the Australian property market.

Click to download WBP News Issue 26