Supervision Guideline – No. 6. Sale of residential property – selling price and other representations

Supervision guidelineFurther clarification
6.1. Clause 6 is only applicable to the sale of residential property.

6.2.A principal licensee must prepare and maintain written procedures for substantiating any estimated selling price, as defined in section 72 of the Act, that has been provided to a seller or prospective buyer of residential property.  
Policies and procedures must be in place detailing how the agent arrived at the estimated selling price, being provided to a seller as well as buyers and potential buyers.

Definition of ‘estimated selling price’: estimated selling price for a residential property, means the price or price range specified, under section 72A, in the agency agreement for the sale of the property as the agent’s estimate of the likely selling price of the property.  
6.3. Without limiting clause 6.2, the written procedures must ensure that the following factors have been considered when determining the estimated selling price:
6.3.1. any sales of comparable properties,
6.3.2. feedback from potential purchasers,
6.3.3. any current or relevant valuations provided in respect of the property,
6.3.4. the characteristics and features of the property,
6.3.5. the methods used to market the property,
6.3.6. any other available factor that may affect the estimated selling price.  
The procedures must be available in writing and must include the following:
– Comparables used Feedback records from potential buyers enquiries
– Any relating valuations available on the property
– Details/ description of the property
– Marketing conducted for the property
– Any other factors that may impact the estimated price provided – e.g., any material facts.    
6.4.A licensee must retain a record of information that demonstrates how the estimated selling price was determined to be reasonable.  The records of the research conducted, used to arrive at the estimated selling price – must be kept on the property file.    
6.5.A licensee must ensure that the estimated selling price is reviewed at least weekly to confirm it remains a reasonable estimated selling price.  There must be a record on file that the agent has reviewed the estimated selling price weekly.
[this may include e.g., buyer feedback]
6.6. When changes are made to an estimated selling price, a licensee must ensure:
6.6.1. the change is communicated in writing to the vendor with evidence of how they estimated the revised estimated selling price as soon as practicable, and
6.6.2. the relevant agency agreement is amended to reflect the revised estimated selling price.  
When changes are made to the estimated selling price; e.g., change in the market. The agent must:
Communicate these changes to the vendor as soon as practicable – in writing.
[It is recommended the agent meet with the vendor to discuss the changes and reasons for the change]

The agency agreement must be updated – [this can be by adding an addendum and attaching to the agreement]  
6.7. Where there is a difference between the estimated selling price and the actual selling price, a licensee must be able to demonstrate that the difference was reasonable in the circumstances.  If the property is sold at a substantial higher price than estimated – the agent must have written evidence of why this is so.  
6.8.A licensee must ensure that any price statement made by a person engaged in the business is consistent with:
6.8.1. the vendor’s instructions, and
6.8.2. is not lower than the estimated selling price.  
The licensee must ensure that all relevant staff are aware of the vendor’s instructions and must not be quoted lower than the estimated selling price, to any potential buyers  
6.9. Where a vendor instructs a person engaged in a licensee’s business not to disclose a selling price, a licensee must ensure that the estimated selling price or any other selling price is not disclosed to potential buyers in writing or verbally by any person engaged in the business.  Once the property is sold;
The vendor may request the sold price not be disclosed. And the agent must obey the vendor’s request.  
6.10. Where a licensee is responsible for managing the sale of a multi-unit or multilot property under an agency agreement, they must comply with the following:
6.10.1. If any price indication is given, it must include the estimated selling prices for the lowest and highest priced properties in each property category expressed by: a. providing the price ranges for each category, with the low end of the range being the estimated selling price of the lowest priced property in the category and the higher end of the range being the most expensive property in that category; or b. stating the estimated selling price in the agency agreement of the lowest and highest priced properties for each property category
6.10.2. Any collective marketing of residential units or lots that include a price indication must also advise prospective buyers that there are multiple properties within each category of varying prices
6.10.3. All advertising and marketing must be updated to reflect the value of the current lowest priced lot or unit available.  
If the property/ies being sold are a block of units/apartments. The agent must provide for the estimate price for the lowest and the highest priced property- this can be expressed by:
– Provide price for each type of apartment e.g., the lowest price of the cheapest property and the most expensive at the higher end of the range. Or
– Lowest and highest price for each type of property.

– Any brochures must clearly define the price ranges.
– All marketing must reflect the value of the lowest priced property.  
6.11. A principal licensee must prepare and maintain written procedures that ensure all persons engaged in the business who are involved in the sales process are aware of, and meet, the following requirements:
6.11.1. All advertising material must accurately describe the property concerned and the information provided complies with the relevant agency agreement and legislative requirements in the Act, the Australian Consumer Law under the Competition and Consumer Act 2010 (Cth),
6.11.2. All conflicts of interest must be properly disclosed, as required by Division 4 of Part 3 of the Act, to the clients, and where appropriate, any prospective buyers,
6.11.3. The listing agent engaged to sell the property must be aware of the restrictions on obtaining a beneficial interest in the property.
The licensee is responsible to have policies and procedures relating to the following [at a minimum]:
– Property descriptions must have accurate detail of the property, ensuring it complies with legislation – e.g., distances to shops, recent photos
– Any conflicts of interests – must be disclosed to all parties e.g., if relative/ friend/ colleague provides referred business, such as mortgage broking.

and/or

– Beneficial interest e.g., if relative/friend/ colleague is the successful buyer of the property.

Relating links: underquoting