How to protect yourself from regulator scrutiny this spring auction season
It’s spring auction season, and as real estate agents busy themselves with new listings, Consumer Affairs regulators are increasing their levels of industry scrutiny. It’s common for regulators like Consumer Affairs Victoria to send inspectors to auctions and open for inspections at this time of year, and they’re usually on the lookout for any signs of underquoting or other non-compliant behaviour.
Following investigation by the regulators, Australian courts have the power to impose substantial monetary fines on Real Estate Agents who are not compliant with the Estate Agents Act, the Australian Consumer Law and Sale of Land Act. In some instances, estate agents may lose their license or face jail time if significant breaches occur.
To help you stay on top of your game this season, we’ve put together a quick checklist of internal systems that you can implement to help you stay out of trouble when marketing your properties.
1) Be sure that your appraisal price takes into account three comparable sales.
Your appraisal price is your Estimated Selling Price (ESP) of the property. This requires you take into consideration the three most comparable property sales in the area as per the legislative requirements. Remember also to keep a record of the date and the appraisal price provided to a proposed vendor, even where the appraisal was done verbally.
2) Provide the vendor with an Estimated Selling Price before they sign the authority.
This isn’t just good advice, it’s also a legislative requirement. Ensure that you have provided the vendor with an Estimated Selling Price (ESP) before you ask them to sign the authority. As an agent, it is your responsibility to provide an accurate ESP based on your expertise in the area and taking into consideration the 3 most comparable sales. Remember, if you are providing a price range for the ESP, there must not be more than a 10% difference between lower and upper amounts presented.
3) Ensure that the Indicative selling price aligns with the either the Vendor’s reserve price or your ESP.
The Indicative Selling Price (ISP) is the price that you must include in the Statement of Information. It provides a price guide for the property that is to be sold. To stay on the right side of regulators, make sure that the ISP aligns with the vendor’s reserve price. In the event that they have not set a reserve price, make sure that the ISP aligns with your Estimated Selling Price.
4) Make sure that the only price quoted to potential buyers is the Indicative Selling Price.
It’s easy to get into trouble with this one. To avoid issue of underquoting, make sure that the only price that is quoted to potential buyers (either verbally or in print) is the actual indicative selling price. When speaking to potential buyers at open for inspections stay away from quotes such as, “buyer interest is around…” or “recent sales has it at ….”
5) Get your internal processes in order
Our final piece of advice is to set up an internal checklist within your agency to make sure that the above 4 points are carefully adhered to prior to advertising the property. Don’t just assume that everyone in your agency understands what needs to happen. Set up careful processes and make people accountable for the information that leaves your agency. It’s also a good idea to put checks in place throughout the campaign to make sure that any changes to the indicative selling price are immediately changed in the Statement of Information and in all marketing.
If it’s been a while since you reviewed your compliance processes, talk to Apex HR about scheduling an internal sales and processes audit.
For more information, call Diana Bevacqua 0414302115 or visit: Real Estate internal compliance audit
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