Criminal Deception in Real Estate

Real estate agents in Victoria are often unaware that practices regarded as “standard” in the real estate industry are, in fact, serious criminal offences.

Furthermore, because the concept of agency involves a high degree of trust, an estate agent who commits a criminal offence through a “breach of trust” will be sentenced more harshly if found guilty.

Any breach of trust is an aggravating factor in sentencing. The greater the breach of trust, the more likely it is that a term of imprisonment will result – even for someone with no prior criminal history.

The fact that such practices may be common in the industry is neither a defence nor a mitigating factor to warrant leniency.

Obtaining Financial Advantage By Deception
What Is A Deception?
Examples of Obtaining Financial Advantage By Deception

Obtaining Financial Advantage By Deception

The criminal offence of Obtaining Financial Advantage is a form of fraud.

Section 82(1) of the Crimes Act 1958 states:

“A person who by any deception dishonestly obtains for himself or another any financial advantage is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years.”

What Is A Deception?

Basically, the term deception is just another word for “trick”.

Section 81(4) of the Crimes Act states:

“deception means any deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including a deception as to the present intentions of the person using the deception or any other person.”

Deliberate or Reckless

An estate agent may say to a purchaser, “We already have an offer of $260,000 for this property, so you’ll have to increase your offer to beat that”.

If he makes that statement not knowing whether other offers have been made or not and either not caring whether the statement is true or false or hoping that the statement will turn out to be true, he is guilty of an offence if the statement does turn out to be untrue and, in consequence, the purchaser is induced to pay more for the property.

It is sufficient to constitute a criminal offence if the estate agent, to obtain a financial advantage, makes a statement which he knows to be false or does not know to be true.

Words or Conduct

While false statements are probably the most common methods of deception, conduct can also be sufficient. Doing something to conceal defects can amount to a deception.

For example, if an estate agent advises a vendor to paper over cracks in a wall so that a purchaser will be deceived into paying more for the property than its true condition warrants, then both the vendor and the estate agent could be found guilty of deception.

“Caveat emptor” (let the buyer beware) is not a defence to a criminal offence.

What Must The Prosecution Prove?

To have a person found guilty of Obtaining Financial Advantage By Deception, the prosecution must prove:

Identity – It must be shown that the accused is the person who committed offence. This is usually be done by way of admissions made by the accused, witnesses providing evidence of statements made or the conduct of the accused, or circumstantial evidence.

Deception – A deception may be made by any misleading conduct or statement, whether by an act or omission. It may be a deception as to fact or law or as to the present intentions of the accused or another person. The deception may be either deliberate or reckless. It needs to be proved that a financial advantage was obtained by means of the deception.

Obtaining – This includes obtaining for another or enabling another to obtain or retain. For example, the estate agent is aware that a garden shed is a “fixture” that the purchaser is entitled to own as part of the purchase, but tells the purchaser that she can have it in return for allowing the vendor to remain in the property after settlement. The agent has obtained an advantage, not for himself, but for the vendor.

Financial Advantage – The Oxford dictionary definition defines “financial” as being of or pertaining to finance or money matters. It defines “advantage” as having the better of another in any respect, superiority, benefit, profit.

An easy way to understand the concept is in terms of reducing, delaying or deferring, or evading the payment of a debt. Even if payment is delayed for a period of time, and then paid, the offence is still committed if the delay is the result of a trick.

Examples of Obtaining Financial Advantage By Deception

Exclusive Sale Authority

The estate agent says that a vendor’s property is worth $350,000 but knows that the property really worth no more than $290,000. After the Exclusive Sale Authority has been signed, the estate agent runs an advertising campaign, and then an auction in order to “condition” the vendor into accepting that the market price of the property appears to have fallen to $290,000.

Comment: The estate agent has dishonestly obtained what is essentially a the benefit of an exclusive contract as the result of a trick. The agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

Conditioning The vendor

The estate agent wants to have the vendor reduce his asking price from $350,000 to $290,000 (the highest genuine offer received). The estate agent allows other interested parties to submit offers that are well below $290,000 knowing that they are totally unacceptable to the vendor, but for the sole purpose of demonstrating to the vendor that the value of his property has fallen. Because the figure of $290,000 compares favourably as against the other “offers”, the vendor accepts a sale price of $290,000.

Comment: There may be more than one trick involved in this example. The vendor may have been tricked into believing that his property was worth $350,000 when in fact it was worth only $290,000. Alternatively, the vendor may have been tricked into believing that the property was worth only $290,000 when in fact it was worth more. The agent has committed the criminal offence of Obtaining Financial Advantage By Deception.


The estate agent has told a potential purchaser that the vendor’s asking price is $300,000 and the purchaser arrives at the property with the estate agent for an inspection. The estate agent asks the vendor to leave the house while she shows the purchaser around. During the inspection the purchaser tells the estate agent, “I’ll give him $250,000 but that’s it.” The estate agent replies, “I’m sure I can get the vendors to take $280,000 if you’ll come up to that.” The purchaser says, “Get them down to $270,000 and I’ll do it”.

Because the estate agent is keen to win the commission for selling the property, she tells her vendor client that she has worked extremely hard to get the purchaser to pay the asking price, but can get no more than $270,000. Because the vendor is reluctant, the estate agent then tells him that the market has “softened” and that recent figures indicate that $270,000 is really a very good price for his property. The estate agent does not know whether or not this is really true, but the vendor is not willing to compromise without a good reason. The vendor eventually accepts the offer, but later reads an advertisement by the same estate agent declaring that the area around the vendor’s property is “booming”.

Comment: The estate agent has been reckless in advising her client about the current state of the market. Because the estate agent made a statement, not caring whether it was true or not, and the statement turned out to be false, the agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

Dummy Bids (Whether by the Auctioneer or from an associate in the crowd)

There is a great deal of misunderstanding about the concept of “dummy bids”. Estate agents incorrectly refer to dummy bids as “vendor bids”. A true vendor bid is really a form of counter-offer. The purchaser says, “I offer to buy for $290,000.” The vendor responds by saying, “I’ll make a counter-offer to sell for $300,000.” There is nothing wrong with the making of an open counter-offer.

The process becomes a crime when a “trick” is introduced by the auctioneer creating the false impression that there are genuine bids higher than those made by the actual bidders.

The trick usually takes the form of an auctioneer pretending that he has received a higher bid from another genuine, competing purchaser, when in fact it is no more than a counter-offer made by the vendor.

The reason for the trick is that a vendor can make only one counter-offer before the auction will stall.

Example: After bidding $290,000 the bidder hears the auctioneer declare, “The vendor makes a counter-offer of $300,000.” The bidder knows that if he accepts the $300,000 counter offer the vendor can go no higher. (After all, what would the bidder say if he called out “OK, I’ll pay $300,000” only to hear the auctioneer reply with “The vendor makes another counter-offer of $310,000”!)

In order to avoid this situation, the auctioneer tricks the bidder into believing that he is competing with other genuine bidders.

Note: Whether or not this occurs before the reserve price is reached makes no difference – if the eventual purchaser increases the amount he is prepared to pay because of the “trick”, then the offence of Obtaining Financial Advantage By Deception has been committed.

What has attracted the higher bids is the belief by the true bidders, deliberately created by the auctioneer, that if they do not bid higher, they will be outbid by some other legitimate purchaser. That is the deception.

Reserving the right in an auction contract for the auctioneer to make bids on behalf of the vendor is no defence to a criminal offence.

If a purchaser, at the time he makes his higher bid, does so because he believes the prior bid is real (when it is actually a dummy bid), a financial advantage has been obtained by deception.

Another, far more insidious form of the trick is to have an associate of the estate agent in the middle of the bidders at an auction, making dummy bids to artificially inflate the auction price, by creating the impression that the property is much sought-after.

In this situation there may be only ONE genuine bidder, who is effectively bidding against himself, alternating with the dummy bids which can never purchase the property.

This conduct is blatantly deceptive, and clearly constitutes a criminal offence.

Comment: The only time an effective counter-offer can be made by a vendor is when it is the last offer being made.

If an auctioneer advises a vendor client that a series of vendor bids can legally be used to bring the price up to the vendor’s “Reserve Price”, this advice could itself constitute a trick and complete the criminal offence of an Obtaining Of Financial Advantage By Deception.

Building Inspection Conditions

The purchaser is concerned that the house he is purchasing may have hidden defects, such as dampness or termites. He tells the estate agent that he will be making his offer “subject to a building inspection”.

Instead of advising the vendor to have his solicitor draft an appropriate condition for the contract, the estate agent offers to insert “the standard REIV building inspection condition” into the contract.

The agent is aware that the standard REIV building inspection condition allows the purchaser to avoid the contract only if the building inspection report discloses “a major structural defect”. The estate agent is also aware that dampness and the presence of termites rarely constitute a “major structural defect”.

Comment: If the purchaser has been tricked into believing that the special condition offered by the estate agent is adequate for the purchaser’s purpose, and for this reason the purchaser signs the contract, then the agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

Referral of Clients #1

The estate agent is married to the owner of a local conveyancing service, and therefore shares in the profits generated by the business. Whenever vendors or purchasers provide details of their solicitor or conveyancer to the estate agent, he tells them falsely “Our preferred conveyancer is Klunky Conveyancing; we recommend them because they really look after their clients.”

Comment: If the estate agent has referred the client to his wife in order to gain a financial advantage for himself, or for his wife, but has tricked the client into believing that the referral is for the client’s benefit, then the agent may have committed the criminal offence of Obtaining Financial Advantage By Deception.

However, the issue will always be whether the victim of the ploy has been “deceived”. A mere recommendation may not always constitute a deception. While the estate agent clearly has a conflict of interests, whether it constitutes the offence of obtaining a financial advantage by deception will depend upon the precise representation made in each case.

Referral of Clients #2

The estate agent warns a purchaser that if she seeks legal advice from a solicitor, before she signs the Contract of Sale, she will lose the right to “cool off”. She shows the purchaser the provision of the front of the Contract that states, “The 3 day cooling-off period does not apply if you received independent advice from a solicitor before signing the contract.”

The estate agent is concerned that the purchaser may not proceed with the purchase if she obtains proper legal advice. She also knows that conveyancers are not permitted to give legal advice.

The estate agent suggests that the purchaser should avoid using her solicitor, and refers her to a local conveyancer to “peruse” the contract for her because conveyancers are not solicitors and the right to “cool off” will still be available.

Comment: If the purchaser is tricked into believing that her interests are best served by avoiding her solicitor, and using the conveyancer nominated by the estate, and on this basis signs the contract, then the estate agent may have committed the criminal offence of Obtaining Financial Advantage By Deception.

However, the issue will always be whether a “financial advantage” has been obtained from the deception. If, despite the misleading legal advice to consult the conveyancer, the purchaser would nevertheless have purchased the property with the advice of a solicitor, it is unlikely that a financial advantage will have been obtained. However, if the ploy prevented the purchaser from discovering some defect in the purchase that would have ended the sale, then a criminal offence will have been committed.

Signing An “Offer” – Signing A Contract Note

The estate agent knows that the purchaser is concerned about signing a “Contract” before discussing the purchase with her family and before she obtains legal advice.

The estate agent explains to the purchaser that the Contract Note he is inviting her to sign is not a Contract. He says, “It’s not a contract at this stage, it’s only an offer, and all offers have to be submitted in writing. There is no contract unless the vendor is prepared to accept your offer.”

The estate agent knows that in strict legal terms no formal contract exists until an offer is actually accepted by the vendor, and the purchaser is informed of the vendor’s acceptance. However, the estate agent also knows that the purchaser does not want to sign a contract, and that by this she means a binding commitment to purchase.

Knowing that the purchaser does not wish to commit at this stage, he convinces her to sign the Contract Note in order to submit her written “offer” to the vendor. The vendor accepts the offer by signing the Contract Note, and the agent later telephones the purchaser and surprises her with the news that she has purchased the property.

Comment: Because the estate agent knew that the purchaser did not want to commit to the purchase at that stage, his advice to her as to the meaning of the legal term “Contract” amounted to a trick. If the purchaser committed herself to the purchase as the result of the estate agent’s trick, the agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

Advertising Paid By vendor

Estate agent tells the vendor that he must pay for the advertising of his property. The estate agent arranges all of the advertising, ensuring that all enquiries about the property will be directed to her or to her office.

The estate agent explains to the vendor that she will handle enquiries on his behalf, and allows the vendor to believe that all enquiries generated by the advertising he has paid for will be directed to his property or will be handled for the benefit of his property.

The estate agent knows that normal office practice is to direct enquiries on an “as needed” basis – that is, most enquiries are directed to properties according to the estate agents’ needs, rather than on a “who paid” basis.

(This procedure, according to a former estate agent who informed us of the practice, has been used to “punish” vendors who had not paid their initial advertising costs.)

In fact, the estate agent receives numerous enquiries about the vendor’s property, but directs these callers to another property she is selling, but whose owner would not agree to pay for any advertising.

By tricking the vendor into believing that his advertising money would be entirely for the benefit of his property, when in fact enquiries would be directed to other properties first, the agent has committed the criminal offence of Obtaining Financial Advantage By Deception.


The vendor is dissatisfied with the sale campaign because of insufficient interest, and tells the estate agent that he intends to engage another agent. The estate agent tells the vendor that if he is prepared to invest more money in advertising, more interest will be generated.

The estate agent knows that the asking price is too high, and that in time the vendor will lower his price. The estate agent wants to keep the listing, and decides to impress the vendor.

Every time the estate agent takes a potential purchaser to a property, she also takes them to this vendor’s property, even if the property is not at all suitable for them.

The vendor is impressed with the number of “inspections” and decides to retain the estate agent.

Comment: A number of parties have been tricked by the agent, because some of the potential purchasers who were taken to the vendor’s property were led to believe they were visiting a property of interest to them.

Most importantly, however, the vendor has been tricked into retaining the estate agent.

By falsely representing to the vendor that all visitors were genuinely interested in his property, the estate agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

Further, the conduct of the estate agent in diverting enquiries from other properties (whose owners have paid the agent for advertising) to this vendor’s property amounts to a deception committed on the other property owners. The agent has committed the criminal offence of Obtaining Financial Advantage By Deception.

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