Six Victorian real estate agencies are under investigation for suspected underquoting, as the state property watchdog cracks down on the illegal practice.
Rising consumer complaints about underquoting sparked a statewide blitz last year, with the Victorian government ordering Consumer Affairs Victoria to conduct 200 surprise inspections.
Underquoting is when a salesperson advertises a price for a property that is less than the vendor is willing to consider – in order to encourage more buyers to look at the property.
The property watchdog has probed 340 recent property sales for signs of underquoting.
Six major investigations are now underway. The government has not identified the agencies being investigated but said they included franchisees from larger real estate agencies and smaller private operations.
The watchdog has also issued statutory notices demanding paperwork proving no unethical behaviour has occurred.
Consumer Affairs Minister Jane Garrett said surprise auction inspections would continue until July, targeting “hot spots” including the inner eastern suburbs.
“We are halfway through these inspections and the results will be used to inform any changes that are needed,” she said, adding the inspections may also lead to further prosecutions.
While the practice of underquoting can be “extremely difficult” to prove, Ms Garrett said current probes were closely monitoring the auction process from start to finish.
The watchdog is sifting through advertisements, emails and documents in a bid to identify agents that have underquoted.
“It is always going to be a difficult thing to prove but we have to do better than we’ve done,” Ms Garrett said.
Consumer Affairs Victoria received 120 complaints of alleged underquoting or price misrepresentation in the 2014-15 financial year. Complaints have steadily risen since 2011-12, when just 20 complaints were registered, prompting the government to clampdown on the practice.
“We know this is a problem and it can be heartbreaking for potential buyers who are lured in by these tactics,” Ms Garrett said.
Asked if agents could simply stop listing reserve prices ahead of auctions, Ms Garrett suggested future reforms would aim to tackle loopholes.
The head of the Real Estate Institute of Victoria Enzo Raimondo said he supports any compliance activity the CAV undertakes.
“We’re not going to stand by any agent that has deliberately done the wrong thing,” he said.
But Mr Raimondo also said the issue of underquoting needed to be understood in the context of a rising market.
“Even vendors and agents are surprised at some of the prices paid in 2015, especially with a strong overseas investment market,” he said.
Under the current rules, a reserve can be set by a vendor on the day of an auction and it can be higher than the advertised price if interest is strong.
However if a vendor tells their agent the reserve price during the listing campaign, the agent cannot advertise the property below that figure.
The state government is currently reviewing property laws in Victoria, including the conduct of real estate agents and agencies.
It comes as new figures show that in the last two years, 1676 complaints against real estate agents have been lodged.
Agents in Melbourne, Wantirna, South Melbourne, Doncaster East and South Yarra have received the most complaints.