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Vic estate agents fined for underquoting

A Melbourne branch of real estate agency Hocking Stuart has been fined $160,000 for breaching consumer laws by "plainly deliberate" underquoting.

Hocking Stuart Doncaster was on Monday ordered to pay the penalty, following an action brought by the Victorian Director of Consumer Affairs.

The branch was also ordered to pay $10,000 in costs for misleading potential buyers between June 2014 and December 2015.

The contravening conduct, described by Justice Bernard Murphy as "serious" and "plainly deliberate", concerned nine residential eastern suburb properties it advertised in property magazines and online.

The judge found the branch's practice of underquoting was widespread and a significant part of its sales strategy at the time.

In one case, a Doncaster property advertised for more than $790,000, sold at auction for $1.01 million, while a Templestowe property advertised at $1.7 million plus, reached $2.04 million.

The franchise advised vendors underquoting was a strategy to boost buyer interest and deliberately provided false price estimates it knew did not reflect the true price of the properties.

Each of the properties went on to sell well above the advertised range.

"It was intended and was apt to create the illusion of a bargain," Justice Murphy said.

"It involved the deliberate creation of an enticing, but illusory and misleading, marketing web for the sale of nine homes.

"The purpose of doing so was to attempt to generate a higher level of buyer interest in the property, in the expectation it would translate into a higher sales price."

The franchise agreed it made the false representations and that it breached state and federal consumer laws.

The judge estimated the small business derived over $34,000 from the contravening conduct.

He warned the practice of underquoting could not only significantly inconvenience, disappoint and dupe prospective buyers, it also affected the interests of other vendors and agents who complied with the law.

"They suffer unfair and improper competition and may miss out on getting prospective buyers to purchase their properties as a result," Justice Murphy noted.

Hocking Stuart Doncaster's defence that such practices were widespread in the industry was a "two-edged sword", the judge said, and indicated higher penalties were needed as a deterrent.

Justice Murphy said while the agency had a responsibility to obtain the best price for vendors, it was also obliged to act lawfully.

The court ordered the agency keep records of price estimates for three years, publish a public notice advising consumers of the misleading and deceptive conduct, and review its compliance program.

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