Underquoting Change In NSW

Market Insights
8 years ago
2 minutes

New underquoting laws apply to the sale of NSW residential property from 1 January 2016.

The underquoting reforms are designed to stop real estate agents understating property prices.

An agent is committing an underquoting offence if they state or publish 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. 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. 

The reforms that were made to the Property Stock and Business Agents Act 2002 provide clarity for buyers, sellers and agents. They address underquoting with:

  • 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’)
  • more effective enforcement. 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.

Buying a property is the biggest financial investment most people will ever make. When dealing in the residential property market, sellers (vendors) and potential buyers (purchasers) should be able to expect a real estate agent to market property ethically and professionally.

Potential buyers can spend money and time investigating properties based on the advertised or stated value. There can be significant consumer detriment if that value was not a reasonable estimate of its likely selling price.

A review of the previous underquoting laws found that clearer requirements for agents selling property would better protect consumers in the NSW property market.

The previous arrangements also made it difficult to effectively enforce the laws and penalise agents for underquoting. Now, from 1 January 2016, agents face tougher penalties that apply even if they were not aware of the law, or did not intend to break the law.   

The reforms require agents to draw on their skills to make a reasonable estimate of the likely selling price and 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.