A Melbourne real estate agency has been fined a record $880,000 for underquoting 22 properties by as much as $700,000 of the final sale price.
The Federal Court on Thursday fined Fletcher & Parker Balwyn Pty Ltd $4000 for each of the properties that its Canterbury and Blackburn offices admitted to underquoting in 2015.
The agents either knew the vendors would not sell within the price guide, or that the property was likely to fetch far more.
In one case, a property sold for $1.731 million, more than $500,000 over the price indication given to a buyer. Another was sold at auction for $1.6 million, about $700,000 over the advertised price.
Agents explained the marketing strategy in emails to vendors, stating the listed price was “not the sale price”.
It “gets the phone ringing, email enquiries and buyers through the front door”, one agent said in an email, the court heard.
“What Fletchers say differs from the first week and second week of the campaign,” the same agent said in an email.
“If we tell a buyer what you actually want it destroys the campaign.
“Record prices come from emotional buyers when they compete … this is your best strategy.”
Justice Bernard Murphy said the conduct was “intended to and did create the illusion that the properties might be a bargain”.
“In my view Fletchers’ marketing strategy was, at least in part, based upon the view that high sale prices come from competition between emotional or over-excited buyers who have been wrongly persuaded to believe that the property may be within their price range.”
On top of the record fine, Fletcher & Parker was also ordered to publish notices about its misleading and deceptive conduct in full-page newspaper ads and on its website.
Fletcher & Parker will also need to implement a program to educate its agents about their legal obligations, and will appoint a compliance office to ensure the program is effectively designed, delivered and maintained.
Bradley Brown, CEO of Fletcher & Parker Balwyn Pty Ltd, apologised for the “unacceptable conduct” in a statement on Thursday.
“This type of behaviour went completely against everything we stand for as a business and how we treat our customers, which is why we have taken significant steps since the incidents were uncovered in 2015 to ensure they never happen again,” Mr Brown said.
“Immediately after these incidents were identified two years ago, we attacked the issue head on by undertaking a full review and update of our compliance program, revised our training procedures and introduced a stringent live audit and random spot check program.”
Mr Brown said the agency did not tolerate the conduct and had “put strict compliance measures in place to stamp it out for good”.
The action came after ongoing investigations by Consumer Affair Victoria (CAV) through their Taskforce Vesta.
Last week, the Federal Court fined Manningham Property Group Pty Ltd – known as Hocking Stuart Doncaster – $160,000 for underquoting nine properties in Melbourne’s east.
Minister for Consumer Affairs Marlene Kairouz said agents would “pay the price”.
“Underquoting is dishonest, misleading and against the law,” Ms Kairouz said in a statement on Thursday.
“This outcome will give homebuyers the confidence that this dodgy practice is being stamped out.”