HAMMERED: REAL ESTATE AGENTS UNDER-QUOTING PROPERTIES
By Justin Vallejo
UNDER-QUOTING of likely auction prices is rife in Sydney with some agents brazenly stating values as low as half the final selling figure.
An investigation into property sales in the past month has revealed agents are flouting laws meant to stop under-quoting as the market takes off in parts of the city. Most under-quoting is verbal and difficult to prove, but this newspaper found at least 20 examples of properties for which final sale prices were more than 20 per cent above published estimates.
In the worst case, a unit with beach views at Ramsgate Ave, Bondi Beach, was advertised as “more than $800,000’’ but it later sold for $1.6 million — up 100 per cent on its marketed minimum.
Asked about the going price yesterday, selling agent Danny Doff said he “honestly thought’’ the one bedroom apartment was worth between $800,000 and $1 million. But he did admit that the price he put on the agency agreement was significantly above that marketed.
In another case, a property in Oxford St, Woollahra, was also marketed at “more than $800,000’’ . It was sold at auction for $1.475 million. Tony Moses, of selling agency Century 21 Bondi Junction, said: “Two people really wanted it.’’
Neither sale is being investigated by the Department of Fair Trading, but the selling margins on both — 100 per cent and 84.4 per cent — easily outstrip the margin that led to the conviction of Lane Cove real estate agent Sandra Peach in early 2005.
Ms Peach, fined $9900 and $4400, is the only agent to be convicted of under-quoting since it became an offence under the Property, Stock and Business Agents Act. Ms Peach had quoted prospective buyers prices between $1.1 million and $1.4 million while the final price was $1.535 million — an under-quote of between 9.6 per cent and 39.5 per cent.
An Office of Fair Trading spokesman said they had received only 16 complaints for under-quoting since the laws were introduced in 2003.
In other parts of Sydney there is also evidence of under-quoting. At Epping, a property in Epping Ave was advertised as “over $1.325 million” but sold for $1.785 million. Under-quoting is not only illegal it is frustrating for buyers who can spend thousands on searches and inspections for properties they can never afford.
One victim, Lorraine Delprado, 56, of Killara, spent money on searches and inspected a unit in Kirribilli after seeing the property marketed for $300,000 on a website. The unit fetched $500,000 at auction.
Agents on notice: law is watching
By Justin Vallejo
THE state’s fair trading watchdog has set its sights on rampant under-quoting of house auction prices across Sydney, yesterday announcing an inquiry into the practice. The announcement follows an investigation by The Saturday Daily Telegraph, which revealed that the dodgy practice was running rife in sections of the city’s resurgent property market.
The industry-wide inquiry by the NSW Office of Fair Trading will investigate several properties exposed by The Saturday Daily Telegraph in which published quotes fell between 20 and 100 per cent short of the final sale price. Fair Trading will also audit a cross-section of agents to determine how widespread the practice is, with auction spot checks by investigators during the next 10 to 12 weeks.
Fair Trading Minister Linda Burney said yesterday they needed to find out just how much the practice was happening so they could stamp it out.
‘‘ When you think you’ve found your dream home, within budget, there would be nothing more frustrating and disappointing than discovering, when you reach the auction, that you are uncompetitive,’’ she said.
Home buyers welcomed the inquiry as a long-overdue step to stem the ‘‘ grubby ’’ tactic real estate agents use to add bidding heat to auctions — costing thousands of dollars in wasted title searches and legal fees. In one of the worst cases, a Bondi Beach waterfront unit with eye-popping views was advertised as ‘‘more than $800,000 ’’ but sold for $1.6 million — twice its marketed minimum.
Opposition spokeswoman Catherine Cusack said it was astounding that just one agent had been prosecuted in the past four years. ‘‘If The Saturday Daily Telegraph can identify 20 properties that have sold for more than 20 per cent above advertised prices, why can’t the Department of Fair Trading?’’ she said.
The Property, Stock and Business Agents Act, which made under-quoting an offence in 2003, has come under fire for being ineffective. It does not define a set figure to determine under-quoting but only states that real estate agents must believe, on reasonable grounds, their quote was true and they had no reason to suspect it was false or misleading.
Agents yesterday defended their appraisals of Sydney’s property prices. A two-bedroom Dover Heights house was advertised for ‘‘more than $1 million ’’ but sold at auction for $1.345 million — a difference of 34.5 per cent.
‘‘Due to the steep contour of the land from street level, we anticipated difficulties in obtaining [development] approval for the pavement crossing/garaging and this influenced our quote price of more than $1 million,’’ agent Di Grundy said. ‘‘It would be erroneous on your part to suggest I was quoting in the range of $1 million.”
AGENTS’ QUOTES IN QUESTION
By Justin Vallejo
TWELVE real estate agents will be forced to explain why they shouldn’t be charged with under-quoting following a six-month investigation into the practice.
The Office of Fair Trading launched an inquiry into the agents following reports by The Daily Telegraph revealing properties were being sold at auction for well over their marketed price. Fair Trading Minister Linda Burney said agents, responsible for 23 suspect properties identified from the 152 auctions scrutinised, were being called to account.
“Our investigators found that 20 of the 23 properties presented a discrepancy of more than 20 per cent between the minimum promoted price and the price achieved on auction day,” she said. “Two of these returned a difference of more than 50 per cent.”
The Daily Telegraph revealed in June that the industry was running rife with underquoting but only one agent, Sandra Peach from Lane Cove, has been convicted since it became an offence under the Property, Stock and Business Agents Act in 2003. The practice costs home buyers thousands in wasted title searches, building inspections and legal fees for properties they would never be able to afford.
Ms Burney said the 23 agents will be asked to justify their original home estimates.
AGENTS BUSTED FOR LOW QUOTES
By Justin Vallejo
SOME of Sydney’s leading real estate agents face legal action for quoting misleading low prices to prospective buyers, following months of investigations by the Office of Fair Trading.
Fines up to $2200 are to be issued to 11 agencies and their licensees under a sweeping crackdown on under-quoting, an illegal means of enticing buyers to auctions. Another two agencies are to be reprimanded for the offence, which is punishable under the Property, Stock and Business Agents Act.
Among those fined include agents and licensees with the prestigious McGrath group at Lindfield, Double Bay and Leichhardt. The crackdown was sparked by evidence of under-quoting published by The Daily Telegraph last June that illustrated the practice was rife.
Fair Trading Minister Linda Burney said last night under-quoting infuriated buyers on auction day when they learn they were “never in the ball park”.
“Under-quoting causes unnecessary heartache for already stressed homebuyers feeling the pinch of home loan interest rates,” Ms Burney said. “There is also the annoyance of being led down the garden path after wasting time and money on building and pest inspections for a property out of their range.”
Fair Trading investigators scrutinised 152 auctions, checking initial advertising, statements made at open house inspections, auction day results and agency agreements. Among the seven cases involving McGrath agencies was the sale of a house at Gordon, sold by McGrath Lindfield. An estimated selling price of $820,000 to $920,000 was quoted in the agency agreement with the vendor. Fair Trading investigators found buyers were told of a likely selling price of “over $820,000”. The property later sold at auction for $1.1 million.
McGrath Group chief executive John McGrath said investigators had taken a simplistic view of the market and he was going to appeal every fine issued.
“I’m obviously disappointed. We’ve had a great reputation for the exact opposite of this which is why it hits me so hard,” Mr McGrath said. “I think the only thing we’re guilty of is achieving a good price for our vendors. If anyone in our business is unethical or deceptive I will have no hesitation in severely reprimanding or terminating them.”
Bradfield & Prichard Double Bay principal Robert Guth will be fined $1100 over evidence his office underquoted the expected sale price of a three-bedroom terrace at Duxford St, Paddington, at auction on August 18, 2007.
Mr Guth admitted the agency agreement with the vendor quoted a price between $2 million and $2.4 million. However, he advertised the property in a local newspaper for “more than $2million”. The property sold for $2,630,000.
“I fail to see how we did anything misleading to anyone,” Mr Guth said.
Another fined agent, Raine & Horne Burwood licensee Guy Lorello, said he would be challenging his fine of $2200. The agency agreement stated an estimated selling price of a property sold by him last year at between $400,000 and $420,000. An advertisement marketed the property at “$340,000 plus”. The property sold for $435,000.
Mr Lorello said the property was a mortgagee sale. “It just so happened that two buyers got very excited and kept bidding,” he said.
In Sydney’s West, Terry Comino of Ray White Blacktown and his agency face two fines of $2200. Mr Comino did not return calls or an email to discuss his offence involving an agency agreement with the vendor stating an estimated selling price of between $360,000 and $370, 000. Fair Trading claimed, in a document released yesterday, Mr Comino then told buyers a “similar property had sold for $330,000 to $370,000”.
Until now, just one other agent, Sandra Peach of Lane Cove, had been fined for the offence.