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Sydney real estate agents who deliberately underquote property prices will find themselves under scrutiny as NSW Fair Trading cracks down hard on dishonest real estate agents.
Inspectors will attend auctions, open houses, and agencies across the city on the hunt for agents who are deliberately promoting a property for lower than its estimated value.
Those who are caught face fines of up to $22,000, losing their commission, and could also face jail time for breaching the Property Stock and Business Agents Act.
By law, NSW real estates need to provide an estimated selling price based on how much similar homes in the immediate area have recently sold for.
That figure can be a single price or a price within a 10% range, but it should be revised as often as necessary throughout the four-week auction campaign as buyers come through open homes and indicate to an agent what they are willing to pay for a property.
It is not considered underquoting when a property sells for more than what an agent estimated in the selling agency agreement.
Fines have already started being issued
There have been 22 official complaints of underquoting loaded to NSW Fair Trading since the beginning of the year.
And a single week Fair Trading inspectors recognized 14 breaches whereas inspecting 33 gross sales agents.
Better Regulation Minister Kevin Anderson mentioned $6,000 worth of fines were handed out in the first week for a variety of offenses, including underquoting, operating without a license, and failing to have the correct insurance.
“With so many people in NSW looking to buy, the last thing that potential homebuyers need is to have their time and money wasted by real estate agents providing misleadingly low and incorrect price estimates,” Anderson said.
“We will also be using this opportunity to educate the industry and ensure agents are crystal clear on their obligations under the law.”
History is repeating itself
In the year to September 2020, NSW Fair Trading carried out a dozen compliance operations of real estate agents and issued almost $400,000 in fines.
Last month the state government also found 13 real estate agents had illegally pocketed $6 million since November 2019 by stealing from trust funds and rental bonds.
“The number of real estate agents doing the wrong thing is small but it can have enormous consequences for people who are victims of an agent’s criminal behaviour,” Anderson said at the time.
“What I have seen with a number of recent cases of trust account fraud are some of the worst examples of deception, manipulation and gross breaches of consumers’ trust.
“I am putting real estate agents on notice that if you attempt to fleece consumers you will be caught, prosecuted and potentially jailed.”
Worryingly, over a five-year period NSW Fair Trading has fined a whopping 238 real estate agents a total of $523,600 for deliberately understating the value of a property with a view to attract more buyers.
Do underquoting laws reduce dodgy pricing?
There is some question around whether underquoting laws introduced back in 2016 have even helped to reduce NSW real estate agents deliberately understating property values.
But a spokesperson for NSW Fair Trading told the SMH that the department received 109 complaints about underquoting up to 23 November 2020 and 114 in 2019.
The numbers indicate the underquoting laws are working, however, the number of complaints is still higher than in 2014 prior to the law being updated.
Complaints about underquoting topped 266 in 2016, up from 84 in 2014.
The Fair Trading Commissioner at the time said the spike in complaints was because of increased consumer awareness that the practice was illegal.
But the recent spike in fines, which has coincided with a surge in property prices across the country, suggests some agents still haven’t learned their lesson.
However, this challenge in the current market is that rapidly rising property prices have made it harder for agents to set price guides, with some left genuinely shocked by the final sale price.
Other agents have been unable to update price guides due to tight-lipped buyers, but some are deliberately rejecting offers to avoid lifting a price guide before auctions, industry experts have reported.
A warning for buyers
Prospective homebuyers are now being warned to always ask the agent what their estimated selling price is and what the seller’s expectations are.
Buyers should also do their own homework such as researching recently sold properties in the area.
The minister also urged that anyone who suspects an agent has deliberately underquoted their reasonable estimate of a property‘s likely selling price can lodge a complaint online or call NSW Fair Trading.
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