Real estate agents in Victoria will be legally required to reveal a property’s reserve price a week before auction, under nation-first laws to crack down on underquoting.
The Allan government on Thursday announced the major reform that would be introduced to parliament next year.
Under the changes, agents must publish the owner’s reserve price at least seven days before auction day or a fixed-date sale. Real estate agents that fail to disclose within the timeframe will be unable to proceed to auction or sale.
Illegal underquoting is an industry tactic used by some agents who advertise a property for less than the estimated selling price or the owner’s asking price. They do this to draw buyers in and drum up competition.
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Victoria’s consumer affairs minister, Nick Staikos, said the government wanted to ensure the housing market to be fair.
“Underquoting isn’t fair and it’s young Victorians and families paying the price,” he said in a statement.
Last year, a Guardian Australia analysis of property sales data showed underquoting (here defined as any sale where the final price exceeds 10% of the pre-sale price guide) is more prevalent in Sydney (20% of sales) and Perth (18%), and least prevalent in Canberra, Hobart and Darwin.
The analysis found the mismatch between the price guide on property ads and the final sale price was worse for houses than townhouses or apartments and is much more likely when the property is being sold at auction than at private sale.
Under the changes, real estate agents would be required to update all marketing materials to reflect the reserve price and stop using any previous advertising that does not contain the reserve price.
The proposed laws come after the Victorian government earlier this month introduced stricter guidelines for agent’s selection of comparable properties to determine a home’s price guide.
The guidelines aim to ensure agents use the most appropriate comparable local properties when determining a home’s likely price before auction, factoring in things like the dwelling’s age and any renovations.
Consumer Affairs Victoria can ask for evidence from agents showing how they chose the three most comparable properties, and penalties apply for not providing these records.
Last week, the NSW government announced new rules for real estate agents that would mandate price guides on all advertising and a statement of information offered to buyers backing up their estimated sales price – similar to Victoria’s existing system.
In NSW, agents who underquote can be fined up to $22,000 and lose their commission and fees earned from the sale of an underquoted property.
In Victoria, agents who underquote risk fines of more than $11,000 for each breach, or penalties of over $38,000 under the Estate Agents Act.
But the head of consumer research at Finder, Graham Cooke has previously told Guardian Australia these regulations often don’t work – and underquoting keeps happening.