• underquoting


It’s next to impossible to avoid a discussion on underquoting when we work with clients on their property search.  Rarely does a topic create such frustration and annoyance for buyers, and for a practice that is well legislated against, it is surprisingly widespread in Sydney.

What is Underquoting?

Underquoting is when a real estate agent states or publishes a price for a property that is less than their reasonable estimate of the likely selling price contained in the agency agreement with the vendor.

” quote them low, watch them go…  quote them high, watch them die….” 

It is used as a tactic to increase buyer interest and ultimately result in a higher selling price for the vendor.

The process typically unfolds by:

  1. The Agent Quoting A Low Initial Price Guide: The property is initially advertised with a price guide that is intentionally set lower than what the seller is realistically willing to accept.
  2. A Large Number of Buyers Are Attracted To Inspect The Property: The low price serves to attract a higher number of potential buyers who are drawn in by the perceived bargain or affordability of the property.
  3. Increased Competition As A Result: As more buyers express interest, competition among them intensifies. This can lead to multiple bidders and potentially drive up the final sale price.

Underquoting is unethical and illegal. It is misleading and frustrating for buyers who may invest time and resources based on a misrepresented property value. It is also instrumental in eroding many buyer’s trust in the real estate process.

The issues for buyers include:

  • wasted time and effort inspecting properties that are not within their budget that they have no possibility of buying
  • wasted money on due diligence including building inspections, strata reports and legal investigations. These costs can run into substantial amounts for each property.
  • false expectations leading to missed opportunities e.g. while waiting for the auction day, buyers often overlook other properties in the hope they will be successful with the underquoted property.  In a rising market this can be a real problem as time erodes buying power.

Is Underquoting Common In Sydney?

In early October, NSW Fair Trading released the results of their underquoting compliance inspections for June.

Over the month, 87 agent inspections took place and the results were as follows:

  • 50 agents were not compliant – that’s a whopping 57%!  The most common breaches were a lack of written records for verbal price guides, unreasonable estimated selling prices and a failure to comply with the licensees rules of conduct and the supervision guidelines
  • of these 87 inspections, 45 were to previously non compliant agents. 66% of these were found to be compliant – but conversely, 34% of those who had been previously in breach were still found to be breaking the underquoting rules.

Now for the astounding part.  Only 28 of these agents were fined and the total of the fines was $52,800, so an average fine of $1,886 per agent.  22 agents escaped without a fine with 10 receiving warning letters and 12 verbal warnings and guidance.

When looking at the median Sydney house price of $1,110,660 in Sydney (Core Logic, 1 October 2023), the average commission on the median priced home is $22,213 (2% commission rate). These penalties are hardly a deterrent for agents.

How do these NSW Fair Trading findings compare to our experiences?

The majority of properties we inspect are being heavily underquoted. While we do understand that sometimes it can be difficult to predict the level of competition on a particular property, some agents are very blatant in their underquoting.

One recent example is a property on the Northern Beaches our clients were interested in.  The price guide being quoted by the agent was $1.75M which remained unchanged throughout the campaign. The property was still actively being quoted at this level the day prior to the auction, and had naturally attracted strong interest – 15 buyers registered to bid on auction day.  The property sold for a whopping $2.5M and we later found out that the reserve was around $2.4M.

Underquoting Reforms for NSW Residential Property

There are laws to protect consumers from underquoting in the Property Stock and Business Agents Act 2002, and Australian Consumer Law.

In an attempt to better protect consumers, on 1 January 2016 Fair Trading introduced new laws.  These laws require selling agents to use their skills to make a reasonable and fair estimate of the likely selling price.

Agents are required to:

  • include their reasonable estimate of a property’s likely selling price in the agency agreement

    It can be expressed as a price range, but the highest price in the range must not exceed the lowest price in the range by more than 10% e.g. if the lowest price is $1.0M, then the highest price cannot higher than $1.1M

  • Provide evidence

    An agent must provide evidence to the seller of how they have determined the estimated selling price (or the revised selling price).  This must include factors such as the features of the property (for example location, condition, size), recent sale prices for similar properties in the area, economic conditions, market demand and other relevant factors such as rezoning, restrictions on the land or other relevant factors

  • Ensure the price remains reasonable throughout the campaign

    The price must be revised if circumstances affecting the pricing have changed e.g.  factors such as recent comparable sales, feedback from buyers and offers that have been made by buyers.

    Agents must also amend or retract advertisements with a selling price less than the revised estimate

  • Keep records

    An agent must maintain written records of any statements made about the selling price during the marketing campaign

Agents must not:

  • Underquote the selling price

    An agent is not permitted to provide a selling price to buyers that is less that what has been estimated and recorded in the agency agreement with the seller either in person or in writing

  • Use inappropriate wording

    Statements like “offers over”, “offers above” or wording such as $1M+ are not allowed

  • Misrepresent the last bid at an auction

    Agents must not make a statement about the last bid at an auction if it was a vendors bid (made by the auctioneer on behalf of the seller) unless it has been clearly indicated that it was a vendors bid.

When real estate agents are inspected by Fair Trading officers they must provide appropriate documentation to show they have complied with the laws.

The role of the seller’s appointed agent to achieve the highest possible price on the property owner’s behalf does not mean they should manipulate buyer interest with false price information.

Agents who commit an underquoting offence may be fined up to $22,000 and could lose their commission and fees earned from the sale of an underquoted property.

Be aware that, simply because a property sells for more than expected, this does not mean underquoting has occurred.  Sometimes competitive buyer behaviour can result in a much higher sale price than what an agent could have reasonably estimated.  However, the law now requires an agent to be able to show that their estimate was reasonable, up-to-date and evidence-based.

More information on Underquoting laws can be found on NSW Fair Trading’s website.

How to protect yourself from underquoting

Protecting yourself from falling for underquoting requires diligence, research, and a clear understanding of the property-buying process. Here are some tips to help you avoid falling for underquoting:

  • Know your market

    The more research you do and the better you know the market, the more easily able you will be able to develop a good understanding of what a property is worth and determine if an agent is underquoting. So:

    • Do as much research as you can in the local area
    • Check the prices for comparable properties that have sold recently in your budget range. These can usually be found online on real estate websites such as domain.com.au or realestate.com.au
    • Go to as many open for inspections as you can for properties in your budget range
    • Go to as many auctions as you can to get a feel for the level of competition (number of bidders and intensity of bidding) and the actual selling prices achieved
    • Compare the actual sales results for both auctions and private treaty sales to the agent’s selling price estimates. This will give you an indication of whether underquoting is taking place in your area and which agents are more actively underquoting
  • If the agent provides a price guide, don’t take it as gospel

    Likewise, if an agent provides a price guide that seems too good to be true, it usually is! Your market research will guide you here.

  • Enlist professional help

    Consider hiring a Buyers Agent to guide you through the sales process.  Buyers Agents are experts in estimating what a property is worth in the current market conditions and will be able to give you an informed price estimate. A buyer’s agent will also be able to provide negotiation assistance or bid for you on auction day.