The Real Estate Institute of Victoria has been accused of illegally underquoting one of its own properties, and Ray White Real Estate is thinking about leaving the REIV as a result. Last month the REIV sold one of its own properties in upmarket Camberwell, and it was marketed by GormanKelly as being “in excess of $3 million”. After being passed in at auction for $3.5 million, it sold later that day for $3.75 million – 25 per cent higher than the $3 million quoted price.
On the official REIV website they promote their members and, presumably, themselves, as “Ethical … Educated … Expertise”. It is alleged that they might have passed on the “ethical” and “educated” bits in the selling of their Camberwell property.
Down in Victoria it is against the law for agents to market or verbally communicate a property’s price that is lower than the seller’s asking price or auction reserve price, and yet that seems to be what REIV have done. Consumer Affairs Victoria also introduced guidelines last year that said agents should not advertise a “plus” price or an “in excess of” price (click here to see the Consumer Affairs Victoria guidelines). The REIV did a bit of a dummy spit and told its own members to ignore Consumer Affairs and just follow their own guidelines.
But that’s not all of it. The Consumer Affairs guidelines also state that agents are required to update prices during sales campaigns if they receive and reject an offer higher than the quoted price. The REIV rejected an offer of $3.6 million earlier this year.
The CEO of REIV, Mr Enzo Raimondo, says that there’s more to this story, and that they’ll be releasing a statement tomorrow. He says the REIV did not underquote, saying that they weren’t even aware of the advertised price of the property. I find it hard to believe that a real estate institute would not be aware of the advertised price being quoted by the marketing agent, and suspect that unless a full clarification is offered, the REIV could be in a bit of trouble.
Update: 11th August, 2008
The Real Estate Institute of Victoria has released a statement in response to the article in The Age. Here’s their statement in full:
The REIV has decided to issue this statement in response to the article published in The Age on 26 July 2008 which contained inaccurate and biased comments and suggests the Real Estate Institute of Victoria Ltd (REIV) had engaged in conduct that is misleading or deceptive. Mr Pallisco has, in the view of the REIV, written a deliberately biased article for the sole purposes of denigrating the REIV and its Chief Executive Officer.
Paragraph one is inaccurate. Mr Pallisco refers to, “…a curious underquoting deal…”
The implication is the REIV has engaged in misleading or deceptive conduct to mislead the public over the selling price.
The implication is unsubstantiated and false.
Paragraph two is inaccurate. It refers to marketing at “…$3million – plus…”.
To the REIV’s knowledge, the property was not marketed on this basis.
Paragraphs three and four are inaccurate. They imply it is unusual for a property to be passed-in if bidding reaches a figure above that at which it is marketed.
It is common practice for a property to be passed-in, if bidding has not reached the vendor’s reserve.
Paragraph six is inaccurate. It asserts “…the REIV says underquoting has occurred when a property’s sale price is more than 15% more than the quoted price…”.
What the REIV’s “Auction advertising guidelines” state is “…if a price range is to be included in an advertisement the upper limit must not exceed 15% of the amount of the lower limit of the range…”.
Mr Pallisco made no enquiry of the REIV about the guidelines before writing the article.
A copy of the guidelines can be accessed by clicking here.
Furthermore, if Mr Pallisco had bothered to research and acquaint himself – in the interests of presenting a balanced and fair report – with the pricing guidelines published by Consumer Affairs Victoria (CAV) – and published on the CAV website – he would have ascertained CAV do not specify a percentage limit for price ranging in real estate advertising.
If he did acquaint himself with those guidelines, it seems he has deliberately chosen to ignore them or omit reference to them.
Paragraph seven is inaccurate. It asserts the REIV introduced its guidelines in response to a CAV “…crackdown on underquoting that gave real estate agents a 10% margin of error…”.
The REIV introduced its guidelines in response to what it perceived to be disquiet over the multiplicity of marketing techniques confusing to the public. REIV guidelines were introduced independently of CAV and six months earlier as reported in The Age at the time.
If Mr Pallisco had bothered to enquire, the REIV would have advised him accordingly.
Paragraph eight is inaccurate and false. It asserts the REIV disagrees with CAV that price plus advertising is misleading and encourages its members to use it.
The opposite is the case. Before CAV introduced its pricing guidelines, the REIV had, in its guidelines, advised members, “…A single figure price in an advertisement must not be advertised as a price plus…”.
Guidelines were also provided for members and, under the heading “Current practices that will no longer be used”, there appears “$70,000 plus” and “$380,000+”.
Paragraph nine is inaccurate. It suggests there is a “grey area” in relation to a seller being allowed to have a reserve higher than an indicative price.
There is no grey area. A vendor is not obliged to disclose a reserve to a selling agent during the course of a sale campaign and is not restricted in amount, even if unrealistic.
Paragraph 10 is grammatically incorrect.
Paragraph 11 is inaccurate. I said that the REIV Board, as the vendor, was entitled to set whatever reserve they wished, based on the interest received during the market campaign and irrespective of the valuation the REIV had obtained.
Paragraph 14 is inaccurate and false. It suggests the REIV has breached underquoting guidelines.
The REIV has not breached any guidelines. As vendor it did not advertise the property or engage in the marketing of it.
Paragraph 15 is inaccurate. The REIV has never attacked CAV for trying to curb underquoting. In fact, the REIV was included in the working party to assist in the development of the CAV guidelines.
When Mr Pallisco’s article is considered as a whole, its tenor is to suggest the REIV engaged in activity to mislead intending purchasers of its property and, furthermore, recommended advertising and marketing techniques to its members which are considered unacceptable by CAV. The REIV completely refutes these suggestions.
Chief Executive Officer
What do you think? Does this statement from Enzo Raimondo at the REIV adequately address the allegations, or does it fall short?