Underquoting is the practice where agents lure potential purchasers to look at a property with the suggestion that the property will sell for much less that they believe it will.
Does it really happen?
Of course in our strong rising property markets, especially in Sydney and Melbourne, we’re often surprised when an emotional buyer pushes up the price of a home (or investment) in their eagerness to it.
But that’s not what I’m talking about.
Agents who conduct ‘offers above’ campaigns are guilty of underquoting if they don’t believe the home could sell for the quoted figure.
The NSW government has confirmed it will introduce legislation to parliament to toughen the underquoting regime and NSW Fair Trading has released new underquoting guidelines to clarify what defines underquoting and how it can be avoided.
Agents guilty of underquoting will be liable for a $22,000 penalty if they give a false oral or written estimate to a buyer or seller.
Agents must satisfy three tests with their estimates:
- they must believe the quoted price is realistic;
- they must be able to substantiate it; and
- it must reflect the expectations of the vendor.
Here’s what the guidelines say:
“Where a price range is given, NSW Fair Trading considers the lowest price is the agent’s representation to prospective purchasers of a realistic potential selling price,”
“For example, a range statement of either ‘$500,000-plus’ or ‘offers above $500,000’ will be taken to be a price estimate of equal to or above $500,000.”
“Having robust records will help agents respond to any request by NSW Fair Trading to substantiate the reasonableness of an estimated selling price,” according to the guidelines.
“Agents should keep the vendor informed in writing of any changes in their opinion of the likely selling price of the property,” the guidelines say.
“If an agent or their employee makes a statement in the course of advertising a residential property for sale that is less that the agent’s true estimated selling price as recorded on the agency agreement, an offence may have been committed.”