What House Price is Right

Daily Telegraph, Sydney, 3rd November 2007
By Kelvin Bissett

Sydney real estate agents have long had a reputation as a brazen bunch, prepared to do whatever it takes to bag a sale. But right now some agents appear to have gone from brazen into the stupid zone.

A serious Office of Fair Trading investigation into evidence of under-quoting presented by The Daily Telegraph in June is now in full swing. Even industry insiders were surprised at cases cited by this newspaper, including a unit at Ramsgate Ave, Bondi Beach selling for $1.6 million after being given a price guide in a local newspaper of “more than $800,000”.

Since then as many as 40 investigators have been perusing auction results and checking marketing techniques- even going undercover as buyers.

In a sign of how seriously she is taking the under-quoting issue, Fair Trading Minister Linda Burney herself has dropped in on some auctions. Yet it’s still a case for some agents of quote low and watch them go, based on just an hour or two of checking by this newspaper of auction results in recent weeks.

Some agents don’t seem to care that a regulatory watchdog is watching, just as they seem indifferent that buyers may have outlaid as much as $1000 in searches and checks, in the false hope the property was theirs.

Just last month at Strathfield, a four-bedroom home on 989sqm at 6 Albyn Rd was marketed at “more than $1.2m”. The final price at auction on October 20 was $1.82 million. The price exceeded the marketed figure by a breathtaking 50 per cent. Agent Greg Emerton, of Devine Real Estate, denied there was anything untoward in the marketing or the outcome. “There were two people who really wanted it and kept bidding for it,” he says.
Emerton claims any price around $1.3 million, the expected range, would have pleased the vendor.

Under-quoting is an illegal, cruel practice pursued to attract big crowds to auction. It has been illegal since 2002 and those agents who do it face penalties of up to $22,000. They could also be stripped of their trading licence.

Other stunning sales in recent weeks also may invite the intention of investigators- although the agents will argue it was emotional buying or a rising market.

A detached house at 67 Ocean St Bondi was given a price guide of “above $1m”, published in a local newspaper. At auction on October 17 the sale price was $1.521 million, another 50 per cent error.
Tracy Billings of Raine and Horne, Bondi Junction, rejected claims that it was an under-quoting case. “It was two people really wanting the property and the price it went for was much more than we ever thought,” Billings says.
She says she would disclose the price quote in the agency agreement in the event of an inquiry.

A charming art deco unit Alison Rd, Coogee was firmly placed in first-home buyer territory with it’s price guide of “more than $450,000”, again published in a local newspaper. At its October 13 auction there was a very different sort of price- $587,000. The agency was unavailable for comment on the circumstances yesterday. Perhaps they were cases of rookie agents getting their valuations terribly wrong. Perhaps.

Other sales results are curious for the reason they reveal the promoted minimum figure in the price guide was never an acceptable price for the vendor. A unit at 31/100 William St, Five Dock, was marketed at “more than $550K” in the Inner West Courier newspaper.
It achieved a highest bid at auction of $560,000 but was passed in. The unit is now for sale for $615,000. What’s clear is it was never likely that $550,000 was an acceptable sale. The selling agent Tony Andreacchio, of Raine and Horne Ashfield, says “circumstances” changed after initially marketing the property.
Since putting the house on the market “the vendor had seen that a few had sold in the unit block for more and they should get closer to $580,000,” Andreacchio says.

In another case, a split-level family property in Kembla St, Enfield, was marketed at “more than $800,000”. At auction it fetched a highest bid of $835,000, certainly surpassing the price guideline promoted. Yet it was passed in. The home was immediately placed back on the market for $859,000.
It would seem on the evidence the agent was always looking for a price better than $850,000, so why was the figure “more than $800,000” used to promote the property? Why were buyers being told a minimum price figure that was never going to achieve a sale?

In St James Rd, Bondi Junction, a home advertised with a price guide of “about $1.4m” was passed in at $1.51 million. It’s now back on the market with “price on application”. Again, bidding at the marketed price was never going to be enough as the home was passed in above it- the $1.4 million figure appeared to be bait.

A spokeswoman for Burney says the formal part of the inquiry was expected to be completed by November 30, about six weeks later than first planned. The extra time was required “in order to do it properly”, the spokeswoman says.

The truth as to whether an agent has set out to deceive buyers is the secret selling price listed in the agency agreement document signed by the vendor. Inspectors involved in the inquiry will have access to these documents. Accoring to the Estimated Selling Price Guideline for Agents document, posted on the Fair Trading website, the selling price in the agency agreement is “evidence” of the agent’s “true estimate of that selling price.”

Agents can breach the Property, Stock and Business Agents Act 2002 if they state verbally or in marketing a price that is less than that given in the agency agreement.

Unfortunately for buyers, this agency agreement is not available to sight under present arrangements.
Jacque Parker, of buyers agents group House Search Australia, says making agency agreement prices public would fix under-quoting. She puts the rate of serious under-quoting at about one in 20 auctions.

“Most agents do an excellent job in representing their clients’ interests without deceiving buyers, but there is still a small minority that want to mislead buyers,” Parker says.

“But there are enough of these agents out there to be worried about.”

She says that being conned by an agent about the real selling price can be costly. Buyers keen to be properly informed before bidding get not only pest and building inspections, but also plumbing and electrical checks and review of the contract by their solicitor. If it’s a unit, there will also be strata searches.
“Before you know it, you’ve spent $1000”, she says.

Consumer advocate Neil Jenman, a former real estate agent himself, says no one should be surprised that agents may be under-quoting even when under the microscope of a Fair Trading investigation.
“It’s quite simple. It’s bred into some of them to lie,” Jenman says.
He says the only way to stamp out under-quoting is to get serious with prosecuting offending agents.

Real Estate Institute president Cristine Castle says her organisation “only supports law abiding agents”. She says the industry is looking forward to the Fair Trading report and Burney’s response.
Castle, herself an agent in Sydney’s south, says she has never seen a case of under-quoting.
“I believe the majority of agents do the right thing,” she says.

Since under-quoting became a an offence, only one agent has ever been prosecuted. Lane Cove real estate agent Sandra Peach was fined $9900 and $4400. Peach had quoted potential buyers’ prices between $1.1 million and $1.4 million on a property which had a final price of $1.535 million.