Underquoting is a significant problem for Victorian home buyers, the state regulator has warned, as a real estate agency in the blue ribbon suburb of Richmond was handed a record fine for duping customers.
Hocking Stuart Richmond was ordered to pay $330,000 for manipulating 11 house price estimates to deceive home buyers with “the illusion of a bargain” and drive up its profits.
The Richmond-based franchise created an “enticing but illusory and misleading marketing web” that inconvenienced, disappointed and deceived customers, a Federal Court judge said.
“Price is an essential piece of information about the property being offered for sale,” Justice John Middleton said.
“Some (home buyers) may have missed the opportunity to buy elsewhere, being lured to a bargain that did not, and was never going to, eventuate.”
Consumer Affairs Victoria, which prosecuted Hocking Stuart Richmond, currently has 13 more underquoting investigations underway.
Its director Simon Cohen says there is “no question” there is a problem with underquoting in Victoria.
“We have seen at consumer affairs a significant increase in the number of complaints we have received about underquoting.”
“We currently have 13 investigations underway in relation to underquoting, which makes it the most significant nature of real estate practise we’re presently investigating.”
He said Justice Middleton’s penalty will have a “chilling effect across the industry”.
Hocking Stuart Richmond earned commissions of $148,044 from the sale of the houses in the sought-after areas of Richmond and Kew between January 2014 and June 2015.
Hocking Stuart chief executive Simon Jovanovic said he was disappointed the Richmond office was being made an example of for an issue that affects the real estate industry as a whole.
“This is an area that agents, regulatory bodies and industry associations need to come together on to ensure the best outcome for home buyers,” Mr Jovanovic said.
The company was further ordered to pay court costs of up to $90,000 for the serious breach.
Victoria’s Attorney-General Martin Pakula said underquoting is not a smart sales tactic – it is illegal.
“There’s nothing clever about deceiving people who are making one of the biggest purchases of their lives,” Mr Pakula said.
New laws set to come into effect in 2017 would force agents to provide prospective buyers with an indicative selling price, the median price for the suburb and ban words such as “offers above”, “from” or “plus” in advertising.
Under the planned new legislation, agents would receive fines of more than $31,000 and face losing their commission.