NSW Fair Trading has fined 238 real estate agents a total of $523,600 over nearly five years for deliberately understating the value of a property to lure buyers.
However, opinion is divided on whether underquoting laws introduced in 2016 have helped reduce the practice, which prospective buyers often suspect but can rarely prove.
A spokesman for Fair Trading said the department received 109 complaints about underquoting up to November 23 this year and 144 in 2019, which he said indicated the underquoting laws introduced in 2016 were working. However, the number of complaints was still higher than 2014 before the laws were 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.
Underquoting can mean prospective buyers waste time and money on building and pest reports and solicitors’ fees investigating a property that was never in their price range.
One Sydney house hunter, who has been looking seriously for six months, said his experience was that underquoting was “endemic”.
“Just get their price and add on a minimum of $300,000,” he said. “Either they are incompetent or they know what they’re doing – take your pick!”
In another case a property in Newtown was advertised for auction with a price guide of $1.7 million, then withdrawn from auction and put up for sale with an asking price of $1.9 million.
However, whether this would be underquoting depends on what was written in the agency agreement – which Fair Trading has the power to inspect – or if the vendors’ instructions had changed.
The NSW legislation states that real estate agents must give the vendors a written price estimate in the agency agreement and when the property is advertised for auction they must use that number as the basis for the price guide given to prospective purchasers.
The legislation also requires agents to keep file notes of conversations with interested parties and bans certain phrases such as “offers above” or “offers over” or plus signs in marketing the property.
Real Estate Institute of NSW chief executive Tim McKibbin said the underquoting laws had “not provided the consumer with any additional level of comfort”.
“I just don’t understand what great consumer outcomes there are in banning certain words that agents can use – I find that quite bizarre,” Mr McKibbin said.
He added the administrative burden was “very difficult because agents use the car as their office”.
He said there were more allegations of underquoting when the market was on the rise.
“What’s actually happening there is that the prices the agent is quoting have been exceeded because the market is hot,” Mr McKibbin said.
“I don’t think the problem is anywhere near as big as it is portrayed … but I’m not for one minute suggesting it doesn’t happen.”
Lauren Goudy, a buyer’s agent at Rose & Jones who buys property all over Sydney, agreed what looked like underquoting was often not intentional, particularly given there was low market activity during the height of the COVID-19 pandemic.
“If they’re looking at the last six months, there’s not much to base [an estimate] on because there’s been such low stock levels and low numbers of transactions,” Ms Goudy said.
Ms Goudy said the laws provided a framework for agents but she believed prospective buyers should be able to see the agency agreements between agent and vendor.
Bo Xiao, co-founder of Rising Tide Capital, which provides buyers’ agent services, said underquoting was less prevalent than it used to be.
“They want more people on site to create an atmosphere to push up the price but now with the law you can’t just quote something ridiculously low,” Mr Xiao said. “Two or three years ago, I saw agents underquote by $200,000 or $300,000 on a $1 million house but now I don’t see this.”
Source: Thanks smh.com