Statements of information, many of which are quickly out of date in today's red hot real estate market, are "breaking people's hearts" says the Director of KR Peters, Peter Nicolls.
By law agents are required to prepare a Statement of Information for all residential properties they are engaged to sell.
The statement 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. The price must not be less than the seller's asking price or a price in a written offer that has already been rejected by the vendor.
The statement must also include details of three comparable properties or a statement from the agent outlining that they reasonably believe there are fewer than three comparable sales within the designated period.
The median house or unit price in that suburb not more than six months old must also be quoted.
The law was introduced in Victoria to stop agents underquoting which led many prospective buyers to believe a property was within their price range only to despair as the final sale price shot well above what was initially advertised.
The Statement of Information must be displayed at all open for inspections, given to prospective buyers within 2 business days of a request, and updated if there is a change in the indicative selling price.
It is often the first document a consumer will inspect to get an indication of where the vendor is pitching the property.
Mr Nicolls cautioned buyers not to rely on prices quoted in Statements of Information in the current booming market.
"The best thing for a buyer to do is to self-educate by going to 'sold' sections (of websites or newspapers) to establish what is currently on the market and currently selling," he advised.
"For example, you might see a house that sold for $735,000 that a month ago the agent had advertised at $600,000 to $650,000. Within the last six months the low $600,000s was a fair and indicative range, but in today's market the price range for that sale was not correctly reflected on the Statement of Information."
He said buyers should be wary of relying on prices that were achieved up to six months ago.
"If I'm looking at a property and in that same group there has been sales in the past two or three months, they could already be more than 10 per cent out. If the agent displays those sales they are not accurately giving the consumer a true indication of the current price.
"The Statement of Information is hindering buyers more than it's helping. When you have prices on a steep incline the statement is not fulfilling the job for which it was intended."
He urged buyers to spend time viewing as many properties as possible to build up a solid picture of what prices are actually being achieved in their preferred location.
"A buyer needs to go into the area in which he or she wants to buy to understand how long properties are taking to sell and also how many buyers are looking in the area. It is important to understand the competition.
"Don't rely on the Statement of Information. It may only lead to heartbreak."