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Editorial
Government’s underquoting failure abandons consumers making their biggest financial call
Victorians are supposed to live in a world beyond the underquoting of real estate. In May 2017, new rules were introduced that would finally put paid to the odious practice.
The then minister described underquoting as “dishonest, misleading and against the law” and promised that new laws would help stamp it out. To the surprise of not one home buyer in Melbourne, that is not what happened.
Between January of last year and June of this year, The Age decided to track thousands of online property price listings and – where we could – compare them with sales results. Over nearly 26,000 cases, our investigation discovered industrial-scale underquoting is still very much with us.
For most Victorians, a home will be the single largest and most momentous purchase of their lives. But it is also, as many discover too painfully, a moving target.
It is tempting to conclude the state government knows the system is not working. It commissioned an inquiry three years ago into the effectiveness of the laws. In an act displaying contempt to those who provided almost 30,000 pages of submissions, as well as to consumers, it has refused to release the inquiry’s report.
Everyone understands that it is the job of a real estate agent, acting on behalf of their vendor, to create “buzz” around their property or, as one agent put it, to “work the market up”.
But the laws governing these sales also state that indicative selling prices presented to buyers must “be reasonable”.
The Age believes the painstakingly gathered evidence in today’s investigation demonstrates that test is failed far too often.
Of the 25,830 Melbourne properties analysed, 13,507, or 52 per cent, sold above the top end of the guide. In the suburbs of Clayton, Blackburn, Glen Iris, Ormond, Carrum and Hawthorn East, the houses examined sold on average at least $92,000 over the top end of the price guide.
In Blackburn North, the average for 60 sales since the beginning of 2024 was $113,687 above the uppermost figure in the price guide.
This has all occurred at a time no one regards as a boom. There should not be thousands upon thousands of runaway auctions in a falling market.
“It’s entrenched,” is how veteran auctioneer John Keating puts it. “The vendors might say, ‘We don’t want to do that’, but the agents say, ‘No, you have to do this if you want to sell; otherwise you won’t attract buyers. They’ll be viewing properties underquoted by other agents.’”
Keating has long advocated for reserve prices to be revealed before auctions. Dr Peyman Khezr, an academic in the field at RMIT University, suggests that instead of forcing sellers to disclose their exact reserve, they must ensure it sits somewhere within the price guide.
There are tools buyers can use to better navigate this terrain. Just as vendors hire a professional to market the property and negotiate on their behalf, buyer’s advocates can offer an experienced assessment of price guides – for a fee that runs to several thousand dollars. But at a time when affordability is a major issue across society, is it really fair that would-be buyers assume the burden of ascertaining an agent’s bona fides?
Many agents told us they applied their special expertise faithfully in setting prices, but without our reporting there would be no way to check this claim.
As Nigel Gladstone writes in his explanation of how we assembled our data: “There is … no government agency consistently monitoring or publishing property price guides and sold prices, and there is limited access to sales data. This all adds up to a property market in which information is stacked in the real estate agents’ favour.”
The state government insists that its taskforce is at work in this area, taking complaints and handing out fines, but The Age encountered widespread scepticism about its scope and effectiveness, given the continuing scale of the problem.
That 2022 review kicked off with a paper identifying ways that underquoting laws were sidestepped, but despite a commitment to publish the final report that year, it was never released. Our reporters’ freedom of information request to access it was denied. What is there to hide?
Real Estate Institute of Victoria president Jacob Caine, himself a supporter of disclosing the reserve price even if his organisation is not, told us that other factors could lead to a mismatch between guide and sale prices, but that “inherently, people are disappointed by that. People feel cheated.”
The Age believes that far too many people feel that way, and many of them have every right to. It is time for the government to release its review, and kickstart a proper discussion of how to take rampant underquoting off the table.
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