Real Estate Agents on Notice


Ethics of real estate agents came into sharp focus at the end of 2011.

In late October, Melbourne real estate agency RT Edgar Toorak were ordered to pay $200,000 in damages for deceitful conduct – and the seller of the property in question was also found vicariously liable for the actions of their agent. The ruling puts agents on notice that they are to conduct auctions fairly. So what happened?

In this case, Bidder 1 put in a bid of $2.1m for a property owned by the twin sister of RT Edgar’s director. The property was passed in, the agent told Bidder 1 that another party had offered $2.6m. So Bidder 1 upped their bid to $2.7m so as not to miss out. Unfortunately for the agent Bidder 1 ran into Bidder 2 and found out his highest bid was actually only $2.1m. Bidder 1 was awarded damages after proving the agency invented offers to drive up the price (dummy bidding).

As can be seen from this ruling, it’s not just the agency at risk – but vendors too – and whilst dummy bidding may have been accepted practice many years ago, clearly this case shows it can be a costly exercise for agents – and their vendor clients.

Fair Trading NSW said dummy bidding was more common in a rising market and they have conducted two major operations in the past year in NSW identifying six agents and auctioneers who may have been in breach of the Act. Whilst there is no national law against dummy bidding, NSW, Victoria, Queensland and the ACT all have laws requiring bidders to register before auction.

Also illegal under the Act is under-quoting – deliberately understating a property’s value to draw more interest and create the illusion of strong competition.

In another alert to real estate agents, Fair Trading Qld has had reports of properties being advertised as ‘flood free’ in the wake of the January 2011 floods. If you’re an agent advertising in this way OFT says you should bear in mind you can’t make false or misleading representations; you must take reasonable steps to find out or verify the facts to avoid error, omission, exaggeration or misrepresentation; you must encourage the seller to disclose all relevant facts about the property; you must disclose any detrimental features of the property you’re engaged to sell to buyers; and you’re guilty of misrepresentation if you willfully conceal a material fact about a property, such as a previous flooding.

The Queensland Reconstruction Authority has an interactive map showing floodplains and flooding information. The maps show areas of Queensland where, based on geological evidence, there has previously been inundation or there is a probable chance of inundation, but some maps are still being produced. The Authority will release further maps as they become available.



©Lyn Prowse-Bishop,


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