Crackdown on dodgy selling agents
If you’ve been hiding under a rock lately you may have missed the news that the NSW Office of Fair Trading (OFT) have recently issued a crackdown on real estate agents, attending auctions across Sydney in October and November, issuing on the spot fines and taking to task others who have been engaging in misleading and deceptive practices.
NSW Fair Trading Minister Anthony Roberts believes there are concerns some agents are operating without licences and engaging in deceptive behaviour, with a number of agents having been prosecuted for helping themselves to trust account funds, operating without a licence and the concern that some agents are “undervaluing properties to buyers and overvaluing to sellers”
‘We have educated, we have warned and now Fair Trading is stepping up enforcement activities against real estate agents doing the wrong thing,’ he said in a statement on Sunday.
‘Agents underquoting, dipping into their trust accounts or operating without a licence will be subject to the full force of the law.’
Real estate businesses operating without a licence face fines of up to $22,000, with $11,000 fines for individuals trading without a licence. Mr Roberts also said 59 agents had been disqualified this year, with 33 agents being investigated for trust account issues.
59 agents disqualified! That’s quite a high number, so it’s small wonder the public continue to hold selling agents in such low regard, compared to other professions. It’s disappointing, considering the number of ethical and genuinely professional agents we encounter in our dealings. However, as long as such practices continue, nothing will change.
Our biggest gripe at the moment is underquoting. More than sporadic, it seems to be an ongoing practice amongst particular agencies and almost the “norm” that 5-10% needs to be “added” to whatever price guide is supplied. It’s certainly not good enough, in our opinion, to continually blame the vendors (as some agents are in the practice of doing) for setting too high a reserve, as the large majority of vendors are very much guided by the selling agent’s estimate on the original listing agreement.
The Property, Stock and Business Agents Act 2002 makes it very clear that an agent “must not… falsely understate the estimate selling price of the property” by stating “a price [or price range] that is less than his or her true estimate of that selling price”. It also specifies that the “statement in the agency agreement of the agent’s estimate of the selling price [or price range]… is evidence… of the agent’s true estimate”. In other words, what the selling agent tells prospective buyers should be in line with what is shown on the agency agreement with the vendor. Sadly, often this isn’t reality and it’s time that the OFT cracked down on this practice.
Some may argue that auction prices can go beyond expectations. This can certainly and does happen, especially in a rising market but where a selling agent has quoted a price range that seems immediately low and a property is subsequently passed-in at auction on a bid well above the selling agent’s price guide, buyers have a right to be understandably frustrated. Good selling agents, however, know what they’re doing and how to manage their vendors expectations in ways that meet their fiduciary obligations to act in their clients’ interests and in line with their legal and ethical responsibilities to be honest, not to mislead, and to provide potential buyers with realistic price guides. Particularly for those more experienced agents, there really are no excuses for getting it wrong, with the obvious exception of highly unusual or unique properties.
As buyers’ agents, it’s our job to help minimise these situations for our purchaser clients. As we are so familiar with particular areas, and especially individual agents, we have the benefit of a clearer understanding of market values and agency practices. Having access to the latest sales data as well as market movements (days on market, sales histories, multiple sales in an area, median prices, capital growth figures, stock numbers on the market etc) allows us to build a highly detailed profile on a particular property and subsequently hopefully save our clients from the heartache and pain associated with some auctions. We don’t always get it right, as there are certainly some buyers who haven’t carried out their research or, for whatever reason, elect to pay more than what we consider “fair market value” but at least we can provide unbiased advice and save our buyers from making potentially costly mistakes in real estate purchases.