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Understanding the Statement of Information when buying a property

Given the strong current demand across Melbourne’s property market, many buyers are looking for any avenue possible to gain an advantage.

One area in which buyers can secure an edge against their competitors, is understanding and leveraging the material contained in the Statement of Information.

What is the Statement of Information?

The Statement of Information was introduced in 2017 by Consumer Affairs Victoria as a measure to hold agents accountable and prevent under quoting.

As it stands, agents must prepare a Statement of Information, in an approved form, for each residential property they are engaged to sell, regardless of whether the property is advertised for sale.

The document must include:

  • an indicative selling price for the property. This may be a single price or a price range of up to 10 per cent. It must not be less than:
    • the agent’s estimated selling price
    • the seller’s asking price
    • a price in a written offer that has already been rejected by the seller
  • details of the 3 most comparable properties, including the address, date of sale, and sale price
  • the median house or unit price for the suburb. This may be for a period of between 3 and 12 months, and must not be more than 6 months old

The document must be:

  • displayed at all open for inspections
  • included with online advertising
  • given to a prospective buyer within 2 business days of a request
  • updated if there is a change in the indicative selling price

Prior to the Statement of Information being introduced, there was certainly a lot more ambiguity around quotes, with buyers often only able to secure a vague idea from agents regarding vendor expectations.

Quotes were sometimes well over the 10 per cent range, and often changed on an inspection basis. Often buyers seeking a quote range were told the vendor was looking for a price above one million dollars. Whether that was $1.1 million or towards $2 million could be left in the air – definitely not a huge help for buyers assessing a prospective property.

While far from perfect, the Statement of Information has certainly helped bring agents more into line and provide buyers with greater transparency to some degree.

Using the Statement of Information to your advantage

An issue that often causes great frustration amongst buyers, is the quote price/price range, which commonly comes in well under the eventual selling price – particularly in fast moving markets.

This often is largely due to the types of comparable sales being used by agents to justify quotes. The properties chosen as comparable sales are often in the eye of the beholder and used to benefit an agent’s sales aims.

Some of the homes agents offer up as comparable sales can be a little laughable. For example, you might be looking at a home on a nice quiet residential street, only to find that the three comparable sales listed are all on busy main roads. Or a nicely renovated home may have comparable property sales that are run down and in poor condition. Another common occurrence is a terrace house on a large 200 square metre block being compared to a smaller 120 square metre block.

This obviously pulls the quote price for the prospective property down, and in the agent’s eyes attracts more interest, but proves misleading for potential buyers.

A key point for buyers is to understand the purpose of the comparable sales from an agent’s perspective. They are not being used to justify the end sale price, but the quote range. That was certainly not the intent when the regulations were introduced, but unfortunately that’s how it’s used on the ground at the moment.

Another point that can be found in the Statement of Information is the median home price for the area, which can help buyers determine where a property sits relative to the broader market, and can be useful to help determine the value of the prospective property.

While the current system is far from perfect, it is an improvement on the previous arrangements – providing buyers with a rough starting point when assessing prospective properties. Buyers can often forget how vague the system was before the Statement of Information was introduced in 2017, so while not exacting, any moves that bring about greater stringency are certainly welcomed.

Take home message

While there is some useful insight that can be garnered from the Statement of Information, for the most part, buyers would be best to take them with a large grain of salt. They need to be viewed for what they currently are, which is an attempt to have agents disclose and justify their quote prices.

It reiterates the importance of independent research and assessments when determining the value of a prospective property investment. For greater insight into the area, read our previous articles on How to assess a property’s value in a rising market and The underquoting debate: buyer, vendor and agent perspectives.

As we always say at Wakelin Property Advisory; investing in property makes sense, investing in the right property takes knowledge.

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