by Peter Mericka B.A., LL.B
Real Estate Lawyer
alified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
Following on from my previous posting in which I acknowledged Enzo Raimondo, CEO of the Real Estate Institute of Victoria (REIV) as a master of the partial-truth, comes a newspaper article in which Raimondo confirms that “Much misinformation is abroad about property sales” (sic). Of course, Raimondo does not acknowledge his own role in the dissemination of this misinformation.
The Age newspaper is very generous to Enzo Raimondo and the REIV. Raimondo is permitted to misinform consumers on a wide variety of real estate-related topics through his own column in the Saturday Age, and is even permitted to write his own copy. To see just how well The Age looks after Raimondo and his crew, take a look at this item featured on the ABC’s Media Watch: “Dirty Little Secrets“.
Here is is the full article from today’s edition of The Age:
“Auction system’s fair, you can quote me
Much misinformation is abroad about property sales, writes Enzo Raimondo.
SINCE changes were made to the Estate Agents Act in 2004, including the banning of under and over-quoting, we have seen community discussion about the practice on two occasions in 2007 and again this year. These two years have one thing in common: unusually strong demand resulting in vendors’, purchasers’ and estate agents’ expectations being exceeded.
The stories of potential purchasers, and the views of commentators, are frequently reported but rarely are the views of vendors or purchasers canvassed. Like the true picture about this state’s real estate laws, their stories are missing. If the vendors’ or the purchasers’ stories were covered, one thing would be clear: the most important two people in any property transaction generally don’t think the property sold for too much, cost too much or was underquoted.
In a rising market the estate agent may wrongly estimate the sale price, but that does not change the fact that the vendor is pleased because he got a great price. The successful purchaser is pleased because he thinks he got a great home at a fair price.
The underbidders may be disappointed because they did not secure the home they wanted at the price they wanted but that alone doesn’t prove the estate agent or vendor has done the wrong thing; it just shows how auctions work.
Auctions are designed to get the vendor the best price on the day and that depends on a few things none of which is the advertised price. It depends on demand on the day, how many bidders, how much they are prepared to spend, comparable homes that are also for sale and, finally, what the vendor wants.
If you want the surety of knowing what the vendor wants, private sales are the way to go. Unlike an auction, the vendor’s asking price is generally advertised for the 70 per cent of homes in Victoria sold privately.
If you do want to bid at an auction, it’s critical to know that sale prices may often exceed advertised prices and that is not underquoting.
The laws in Victoria require that an estate agent neither overquotes to the vendor to get his business nor underquotes to the public. The price they quote to the vendor and the public are the same unless the vendor has told them the minimum he will accept, in which case the higher one must be reflected in the advertising.
It is suggested that estate agents should be able to predict in a hot market what a home might sell for and their quotes should reflect the final sale price. In a fast-moving market that would only result in estate agents providing inflated quotes to vendors and being accused of overquoting.
It’s important to note that complaints from consumers to Consumer Affairs Victoria are running at about 600 a year out of 140,000 residential property sales seemingly indicating that it’s really not a problem, but that doesn’t mean we can’t improve the transparency and operation of the market.
The Real Estate Institute of Victoria supports the action of Consumer Affairs and we would like three changes. We have asked the minister to change the law to ban advertisements that use “price plus”. If accomplished, this will make it much easier for consumers to compare property ads, as agents will have only three options: no price, a range, or a flat price. This is a position we have held for 2 years.
We want increased education about the state’s laws and how auctions work, so consumers can be better informed. The more access to information about the auction process there is, and the more information there is about what similar homes sold for, the better consumers’ judgments will be.
Finally, when an estate agent uses a price in an advertisement, we want the agent to show every prospective purchaser the comparable sales that were used to reach that judgment. This will enable the purchaser to make the best judgment about how much they want to spend on the day and the highest bidder will win.
Enzo Raimondo is chief executive of the Real Estate Institute of Victoria.“
Let’s examine Enzo’s free plug, and see if we can address any misinformation it may contain…
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