By Julie Barkla
May 9, 2017
Neither, I’m a property lawyer! That was a trick question.
Whilst I’m pretty comfortable about the skills I’m expected to bring to my job, after the latest round of changes to the Estate Agents Act 1980 (Vic) (“Estate Agents Act”), Victorian real estate agents might be forgiven for wondering if the critical elements of their vocation have suddenly quite fundamentally changed. It would appear that real estate agents now need to start behaving more like professional property valuers.
The Estate Agents Amending (Underquoting) Act 2016 introduced changes into the Estate Agents Act, which amendments took effect on 1 May 2017. If you blinked you might have missed them, but they pack quite a punch for real estate agents.
Whilst an engagement or appointment provided by a real estate agent to a vendor for the vendor’s signature has always needed to contain the agent’s estimate of the vendor’s property’s value, it had previously been accepted that the agent’s knowledge, experience and skill were sufficient warrants of the robustness of the estimate.
From 1 May 2017, however, this is no longer the case. Estate agents will now need to undertake a quasi valuation of a vendor’s residential property in order to arrive at their estimate (“estimate”). In general terms, they will need to:
Given the lag in property data and sale prices becoming publicly available, and the fact that real estate agents may not have a close knowledge of the standard and condition of properties not sold by them, these requirements may pose some genuine obstacles for real estate agents.
New obligations have also been imposed upon real estate agents when circumstances arise which indicate that the estimate in the engagement may no longer be a reasonable one. When such circumstances arise, the agent must, as soon as practicable, notify the vendor to this effect in writing, and provide in writing a revised estimate. The revised estimate must be arrived at by applying the same process as the original estimate, namely by recourse to the three most comparable properties.
Furthermore, within one business day of revising the estimate, the agent must take all reasonable steps to remove any internet advertising for the property which contains the earlier estimate, or revise the advertising so that the likely selling price is not lower than the new estimate. Other (non internet) advertisements must be removed or amended in a similar manner as soon as practicable after the estimate is revised.
But wait, there’s more. In addition to forensically arriving at the estimate in the engagement or appointment, real estate agents must now also prepare a “Statement of Information” after they have been engaged or appointed to sell any residential property. The Statement of Information must contain an indicative selling price in respect of the relevant property. It must also include the “median selling price” for residential property:
The Statement of Information must also contain the address, sale price and date of sale of the three comparable properties which were relied upon in arriving at the estimate in the engagement or appointment.
The indicative selling price in the Statement of Information must also be:
The Statement of Information must be:
A copy of the Statement of Information must also be retained by the agent.
Detailed provisions have also been inserted into the Estate Agents Act as to what statements an estate agent can make to a prospective buyer as to the likely selling price of a residential property they’ve been appointed to sell. An agent firstly cannot indicate a likely selling price that is less than their estimate and they cannot modify any statement as to a likely selling price with words or symbols such as “from”, “over”, “+”, or “starting at”. They also cannot indicate a likely selling range where the upper and lower limits differ by more than 10% and they cannot indicate a likely selling price at or below an amount the vendor has already rejected.
There’s also a bit of administration for the appointed estate agent after an offer to purchase residential property has been rejected. Within one business day of an offer being rejected, the agent must take all reasonable steps to remove any internet advertising for the property which contains an indicative selling price at or below the rejected offer, or if a range had been provided, advertising which contains the rejected price within the range. Alternatively, they can amend the advertising so that the advertised (indicative) selling price is not lower than the rejected offer. Other (non internet) advertisements must be removed or amended in a similar manner as soon as practicable after the rejection of a price which was otherwise at or above the advertised likely selling price, or within the advertised likely selling range.
An estate agent can potentially forfeit any commission or profit earned where they are found to have failed to comply with these new provisions. Whilst opinions will invariably differ, one might have regarded a real estate agent’s critical skills as those conducive to effecting sales. The hat of the property valuer might sit uneasily, but it seemingly must now be worn also.
For further information, please contact Julie Barkla.