Split Threatens Real Estate Institute

The threat by Ray White Real Estate – the largest agency in Australia – comes days after a respected board member, David O’Callaghan, resigned, saying he had lost confidence in the REIV’s top executive, Enzo Raimondo, and president, Neil Laws.

Andrea McNaughton, chief executive of Ray White in Victoria, told The Sunday Age the REIV’s role in underquoting its Camberwell property "sends a curious message".

"As a large group that does not rely on the REIV for its training and support, but rather for its portrayal and leadership of the industry, (we believe) this incident does little to support that notion of value for its fees," she said.

"We believe it is the role of the REIV to challenge the long-held negative stereotypes of agents doing wrong things by the public. We expect the REIV to typify the principles of ethical conduct at all times."

The REIV last month sold a Camberwell property it owned, which was verbally marketed as "in excess of $3 million" by agency GormanKelly. A REIV-commissioned independent report valued the property this year at $3 million. After being passed in at $3.5 million, it sold later that day for $3.75 million – 25% higher than the $3 million quoted price.

"They deceived buyers into thinking they could have bought the property for $3.01 million," said real estate consultant and consumer advocate Neil Jenman.

Under the law, underquoting occurs when agents advertise or verbally communicate a property’s price lower than the seller’s asking price or auction reserve price. The practice was outlawed in Victoria in 2004, and Consumer Affairs Victoria introduced even tougher guidelines in November last year.

The guidelines forbid realtors advertising a "plus" price or an "in excess of" price. But in an extraordinary move the REIV told its members to ignore rules and use the organisation’s guidelines. REIV guidelines allow for some things the CAV deems misleading, including advertising a property without an estimated selling price, if it’s for sale at auction.

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 before the campaign started, with Mr Raimondo saying the group had good reason to expect it would sell at its "ambitious" reserve.

Mr Raimondo did not return calls yesterday. But Mr Laws disputed that the REIV engaged in underquoting, claiming the accusations were "not necessarily the facts" and that the organisation stood behind its current board.

He said the REIV was taking advice on its position and would release a statement tomorrow.

Mr Raimondo has previously denied the REIV had underquoted, saying the organisation "wasn’t aware" of the advertised price of the property.

Mr Jenman was dismissive of the REIV’s defence. "Nobody sells a property blindfolded to that extent, particularly someone like the REIV, which understands real estate," he said.

Despite requests, the REIV has failed to produce for The Age a copy of the contract of sale, which would show it signed off on a price the Camberwell property would be marketed at. The REIV has also failed to produce copies of letters, required by the CAV, which would also require the REIV confirms a price the property would be marketed at.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.