Reforms to rein in estate agents’ rorts need more teeth

One of the most rampant rorts encountered by people wanting to own a home – underquoting by real estate agents – has angered buyers and sellers for years, but following a Herald campaign, the Minns government is to introduce regulations that may curtail, but not eradicate, some abuses.

Governments and the industry have made billions from the real estate boom, and it’s way past time some of these riches were spent on a fairer deal for prospective buyers, who bear the brunt of industry-wide deceptions.

The Minns government’s planned reforms include mandated price guides on all advertising and a statement of information offered to buyers backing the estimated sales price claims. Also on the cards are increased penalties for underquoting from $22,000 to $110,000, or three times an agent’s commission, whichever is greater.

The industry overhaul comes three months after a national investigation by The Sydney Morning Herald revealed almost half of all property sales at auction in Sydney sell for more than 10 per cent above the guide. Underquoting has become so rife that in a national call-out by the Herald and The Age to readers to share their auction experiences, 6344 of 9100 respondents reported spending time and money investigating properties they were unable to afford.

Further, our data analysis of 36,000 auction campaigns showed nine out of 10 properties sold for far more than the guide. Melbourne was once Australia’s auction capital, and Victoria has penalties for underquoting on properties, but the efficacy has been so questionable that a taskforce was appointed and now, like the Minns government, in the run-up to a state election, it is promising tougher regulations.

There has been little disincentive for the industry to stop using underquoting as a carrot to buyers. Amid spiralling profits and consumer disgruntlement, the industry has done little to clean up its own home.

Tim McKibbin, who has been chief executive of the Real Estate Institute of NSW for 21 years, audaciously told the Herald’s Lucy Macken that more needed to be done to train and enforce compliance among agents. And in his experience, government excluded any serious consultation, he added fatuously.

The NSW reforms are welcome – but they are too soft. The industry has escaped penalties for years and nobody is under any illusion that only the lower end of monetary fines will be enforced.

Meanwhile, another closed-door arrangement between vendor and estate agent – the confidential reserve price which can be adjusted during an auction while buyers remain in the dark — remains untouched: the Minns government should have done buyers the favour of ensuring the reserve price is no higher than the lower end of the advertised price guide. And maybe force estate agents to scrap their “price withheld” habit and allow purchasers to compare and contrast on their own.

The reforms are a start, but in a strong property market, state and federal consumer watchdogs growl but don’t bite. The Minns government needs to provide more crunch.

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