Misleading and Deceptive Conduct in Real Estate

It is an offence under state and federal law for an estate agent or representative to mislead or deceive a client (seller or landlord) or a consumer (buyer or tenant) by their conduct or representations.

So, what is fair?

An advertisement will be compliant with advertising laws if it meets the test of truthfulness and does not attempt to hide or not disclose important information which would otherwise assist the prospective purchaser to make an informed choice.

Consequently, important information should not only be disclosed clearly using language that the reader will understand, but also not be hidden in the fine print.

Similarly, any limitations or exclusions in the offer being made should be disclosed and should not be hidden in the fine print.

Start by asking two fairly straight- forward questions: ‘Is it the truth?’ and ‘Does the ad convey a truthful impression overall?’.

The Court has also adopted the following as a test to what is misleading “the advertiser must be assumed to know that the readers will include both the shrewd and the ingenuous, the educated and the uneducated and the experienced and inexperienced in commercial transactions”.

Agents cannot avoid liability simply by claiming that the buyer or consumer should have made reasonable enquiries and checked the information provided.

Agents are responsible for their words and actions in their dealings with their clients.

Agency identification

All agency advertisements should include the name or logo of the agency.

Some advertisements must also give an address for the agency.

False testimonials

If you use testimonials such as quotes or other comments from satisfied clients to promote your agency’s services, they must be accurate.

Do not:

  • invent quotes from genuine or fictitious clients;
  • make false or misleading comments about actual comments made by clients; and
  • use testimonials from genuine clients that are false or misleading.

Photographic representations

Agents must ensure that any claims made about any property or land characteristics in any photographic representations are accurate and could not give prospective buyers the wrong impression.

Statements made in conjunction with photographs of the views and facilities available in a local area must not be false or misleading.

Examples of undesirable photographic property advertisements can include photographs of:

  • a water view or scenery, placed next to a photograph of a house, makes it difficult to ascertain whether the water view or scenery can be seen from the house or whether it is a ‘location shot’;
  • a beach scene with the wording ‘minutes to this’ or ‘stroll to beach’ typed above the photograph does not give a clear indication of the distance from the property to the beach which is being shown;
  • a park and beach with the wording ‘opposite home’ where, in fact, this view cannot be seen from the property.

The photographs and wordings in the above examples are likely to mislead.

Any person relying on the photographs to give them an image of the property being offered for sale.

The use of labelling to clarify meaning

Accurate labelling of photographs used in property advertisements can eliminate any doubt in a consumer’s mind about what they actually see in a photograph.

Some examples of acceptable practices are photographs of:

  • a water view which has been taken on the property being offered for sale does not require any labelling one which has not been taken on the property being offered for sale, but is within the immediate area, should have printed on the photograph ‘location shot’;
  • a parkland or bushland which has been taken on the property being offered for sale does not require any labelling however, one that has been taken on the property being offered for sale, but is within the immediate area, should have printed on the photograph ‘location shot’.

The term ‘location shot’ should only refer to photographs of facilities and services within the immediate surrounding area of the property being offered for sale, such as, a park, playground, beach, shopping village.

Generally, the scene in the photograph labelled as a ‘location shot’ cannot be seen from the property being offered for sale, and was not taken on the property itself.

Therefore, the most accurate description to print on the photograph would be ‘location shot’.

Photographic enhancement

Photographs of properties (either internal or external) which have been touched up to hide undesirable characteristics or enhance other features could mislead consumers.

The touching up of photographs would be considered misleading.

Real estate agents must not:

  • modify or allow to be modified photographs of properties so that the images no longer truthfully and fairly represent that property;
  • change the appearance of a property by digitally removing or adding features, but adjusting the lighting slightly to compensate for poor lighting on an overcast day may be acceptable; or
  • zoom in on a photograph of a view which can be seen from the property to make that view appear closer.

The modifications to photographs described in the above examples are likely to be misleading or deceptive.

Price advertising

The following advertising practices and similar methods of price advertising are not supported by regulators.

In most instances, these practices are misleading as they refer to a price the vendor would not accept or a price that an agent does not believe the property would be sold at.

An agent must not misrepresent the price of a property for sale or lease. The advertised price must be fair and reasonable and reflect the current market value and expectations of the seller or landlord.

Any changes during a marketing campaign likely to affect the selling price must be reflected in the advertised price.

For example, if a higher offer is made for a property and rejected, the advertised price must be updated unless the seller or landlord changes their mind.

Properties can be advertised for sale at a single price or a price range.

Rental properties are usually advertised stating the weekly or monthly rent.

Underquoting

Marketing a property for sale at a price that is less than the seller’s asking price, or if this is not known, the agent’s estimate of the likely selling price, is commonly known as underquoting.

Underquoting occurs when a salesperson:

  • advertises a property is available for sale at an amount that is less than the vendor’s asking price or auction reserve price;
  • advertises a price that is less than the salesperson’s current estimate of the likely selling price;
  • advertises or continues to advertise a price that is less than a genuine offer or expression of interest by a prospective buyer that the vendor refused; and
  • gives an inaccurate appraisal of the current market price of a property.

The advertised price must be updated during the sales campaign to reflect any change in the vendor’s selling price, including the amounts of any offers rejected by the vendor.

The price a property is advertised may be either a single amount or a price range.

If the property is advertised for a single amount, it must not be less than the vendor’s selling price.

If the vendor has not provided a selling price, the price advertised must not be less than the agent’s current estimate of the likely selling price.

Price range

If a price range is advertised or quoted, the lowest amount in the range must not be less than the vendor’s selling price.

If the vendor has not provided a selling price, the lowest amount in the advertised price range must not be less than the current estimate of the likely selling price.

“Nearest offer, near offer or best offer”

This practice is misleading except in the situation where a vendor will only consider offers at or below the price stated in the advertising or marketing materials.

An advertiser must be able to provide evidence of the vendor’s willingness to consider such offers, if asked.

Opening bid, or estimated opening bid

Quoting an opening bid or an estimated opening bid in advertising is misleading and constitutes underquoting if the vendor will not consider selling at that price.

If the vendor has set a reserve price, the ‘advertised opening bid’ should not be less than this amount.

Characteristics of land

Representations about potential or permitted use of land or buildings must acknowledge any legal restrictions affecting the property.

These include town and country planning requirements, restrictive covenants, easements and other orders such as injunctions.

Representations about the characteristics of land include:

  • suitability for particular types of rural production;
  • suitability for residential development;
  • profitability of a business associated with the land;
  • drainage, water supply and topographical features;
  • previous use of the land;
  • ability to be subdivided;
  • area dimensions of the land or of buildings; and
  • physical condition or state of repair of buildings or other improvements.

Because any one of these characteristics could be especially important to a potential buyer, you must take care when making any such representations about the land for sale.

Statements about the permitted use of land under anticipated regulation should not mislead potential purchasers into thinking that the regulation has already been enacted.

Facilities

Facilities associated with land have been defined by the court as: ‘… a feature or circumstance which facilitates or renders easier or more enjoyable a person’s occupation, whether as owner of a dwelling house or otherwise, of a piece of land. The availability of electricity, gas or sewerage are more obvious examples of facilities’.

Claims that services such as sewerage, gas, electricity will be connected to land should be made only after the relevant authority has approved the connection and funds are available to connect it.

For example, it would be misleading to describe land as sewered if the sewerage system was only in the planning stage.

People should not be misled about the progress of proposed facilities such as shopping centres, sports grounds or golf courses.

Facilities pictured in advertisements or signs should actually exist. Otherwise, reference to how far they have progressed should be spelt out.

Predictions

The Australian Consumer Law prohibits representations being made about any future event without reasonable grounds.

Therefore agencies should be careful when predicting trends in property values or development prospects.

Past experience of a particular market can quite reasonably be used to predict its future performance.

Such experience could be especially relevant in markets characterised by cyclical patterns.

On the other hand, some markets are so volatile that not even experts can make predictions with any certainty.

Legislation places the onus on the advertiser.

Unless a business can produce evidence to the contrary, the legislation deems it not to have had reasonable grounds for making a prediction.

Acknowledgement

We would like to thank and acknowledge the support and cooperation of NSW Fair Trading and Victorian Consumer Affairs.

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1 comment

  1. The common thread between most of these points seems to be accuracy. The description and photos of the house must be accurate, as well as any testimonial quotes. Every type of law, especially real estate, circles around truth and accuracy, so it’s important to find and be a reliable realtor.

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