What is Underquoting?
Underquoting is when a selling agent states or publishes a price for a property that is less than their reasonable estimate of the property’s likely selling price contained in the agency agreement with the seller.
” quote them low, watch them go… quote them high, watch them die….”
This practice of underquoting can cause interested buyers to waste time and money on inspecting properties, getting reports and attending auctions based on misleading estimates of the selling price.
Buying a property is likely to be the biggest financial investment most people will ever make. It’s a stressful time and buyers have the right to expect that a real estate agent will market a property ethically and professionally.
Underquoting Reforms for NSW residential property
To better protect consumers from the practice of underquoting, on 1 January 2016 Fair Trading introduced new laws. These new laws require selling agents to draw on their skills to make a reasonable and fair estimate of the likely selling price.
They are required to have honest and fair dealings with all buyers and sellers. 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.
The reforms that were made to the Property Stock and Business Agents Act 2002 were designed to provide clarity for buyers, sellers and agents.
1. Clearer rules for agents. A key requirement is that agents must not give consumers understated or vague property prices (eg. promoting a property price as ‘offers above $450,000’)
2. Provision for more effective enforcement of the laws. During an inspection by a Fair Trading officer, agents must be able to provide appropriate documentation to show that they have complied with the new laws.
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.
How to protect yourself from Underquoting
- If the selling agent provides an estimated selling price, don’t take it as gospel. Use it as a guide only
- Research recent sale prices for similar properties in the area you are looking in.
- See how the property market works. Visit as many different properties as you can. Attend the auctions and get a feel for the level of competition in the marketplace.
What you should NOT do:
- Don’t rely on prices that seem too good to be true. This is where your knowledge of the market (gained above) can help you.
- Don’t rely on one person’s judgement. you need to talk to other buyers and licensed property professionals and do your own research.
Engaging Homesearch Solutions Buyers Agent is a good way to protect you from underquoting. Our extensive experience and property databases ensure you will have the most up to date pricing and market information available.