Fair Trading has announced on April Fool’s Day that they will be commencing a blitz of the industry regarding “underquoting”. Leverage has consulted with Fair Trading regarding the scope of this blitz.
The focus of the blitz will be on representation to consumers. Fair Trading will start by looking at the estimated likely selling price placed on an agency agreement. This will be measured against how much the property is sold. For example, where a real estate has estimated the likely selling price of a property at $900,000, and the property sells for $1.1 million, Fair Trading will have a closer look.
This is especially a problem in the current marketplace where the estimated likely selling price of a property is difficult. Moreover, a price chosen at the time of listing may be much lower than the market price at the time of sale.
Fair Trading’s focus is on whether the agent has acted reasonably in setting its estimated likely selling price. Fair Trading will review the comparative marketplace analysis to ensure that the estimated selling price is based on reasonable grounds. Where Fair Trading believes it is not based on reasonable grounds, the agents will either:
- Be prosecuted; or
- Be fined.
One of the most hidden secrets of recent times is the secretary’s supervisory guidelines on proper supervision. It is a requirement of those guidelines that an agency reviews its comparative marketplace analysis weekly. We know of no agency that does formally reassess its appraisal weekly.
Leverage believes that Fair Trading will look closely at the following:
- The original estimated likely selling price;
- The reasons for reaching the estimated likely selling price; and
- The weekly reports are given to vendors.
Disciplinary action will be taken where:
- The agency advertises below the lowest price on their agency agreement;
- There is no comparative marketplace analysis;
- The comparative marketplace analysis does not give rise to the price set out on the agency agreement;
- The agency has not undertaken a weekly review of the comparative marketplace analysis using recent sales and customer feedback; and
- The agent has failed to amend its estimated selling price based on customer feedback.
Fair Trading has the power to issue fines between $5550 and $2200. In this type of blitz, Fair Trading will find the agent, the licensee in charge, and the corporate licensee. One breach could cause an agency to receive a $3500 fine.
It is time you ensure that all comparative marketplace analysis reports given to vendors are on file and backed up by evidence.
Please note that, if Fair Trading does come to your door about this blitz, it will take action against other breaches. So don’t just focus on getting this part of your business cleaned up.