What are the underquoting laws
Underquoting laws introduced in 2016 made it an offence for real estate agents selling residential properties in NSW to understate a property’s likely selling price.
Real estate underquoting takes place when an agent knowingly misleads prospective buyers by understating property prices in an effort to increase competition and ultimately sell for an inflated price.
It is important for agents, as well as buyers, to be aware of how the underquoting laws affect their rights and obligations.
From 1 January 2016, it became an offence under the Property, Stock and Business Agents Act 2002
) for real estate agents selling residential properties in NSW to make or publish a statement about the price of a property that is less than their reasonable estimate of the property’s likely selling price.
Agents face fines of up to $22,000 and risk losing commission and fees earned for failing to comply with the law.
Despite the introduction of these new laws, it is understood that 47 instances of underquoting were found to have occurred in 2017 and that number is expected to be higher in 2018.
What are the key responsibilities under the Act
As a general guide, to comply with the Act real estate agents must:
- ensure the estimated selling price is stated in the agency agreement with the seller
- provide the seller with evidence of how the estimated selling price was determined (such as comparable sales, market conditions and other relevant information)
- ensure they do not provide a price estimate lower than the estimated selling price recorded in the agency agreement (both in any advertising and marketing material and in communications with prospective buyers)
- refrain from using vague price statements such as ‘offers above’ or ‘offers over’ an amount or ‘plus’ a specified price or price range
- ensure the estimated selling price is either a single price or in a price range where the highest price in the range does not exceed the lowest price by more than 10%. This means, for example, quoting a price range of ‘$900,000 to $1,000,000’ is not allowed
- if the estimated selling price changes because of new evidence during the course of a marketing campaign, notify the seller in writing, amend the agency agreement and take reasonable steps to amend or retract any advertising and marketing material
- keep written records of any statement made to potential buyers about the likely selling price of a property
It is acceptable for an agent and a seller to choose not to publish or make any statement about the likely selling price of a property. However if an agent is asked by a potential buyer about the price, they must ensure they comply with the requirements under the Act.
Tips for real estate agents
All real estate agents should familiarise themselves with the underquoting laws and review their operational procedures. Where necessary, agents should change business practices to ensure they are complying with the law.
It is important that real estate agents retain file notes of discussions with sellers and information to show how they arrived at an estimated selling price. Agents should also keep complete and accurate written records of any statements made to prospective buyers about the likely selling price of a property detailing the address of the property, the price or price range and the date and time of the statement. Under the Act, these records must be kept for at least 3 years. However it would prudent to preserve such evidence for longer as not all claims may be received within 3 years. This evidence will be critical to substantiate the reasonableness of an estimated selling price where an agent is asked to do so and/or defend any claim brought against an agent relating to underquoting.
Real estate agents should also become familiar with the requirements under the Australian Consumer Law
which, amongst other things, prohibits the making of false or misleading pricing statements about a property. For instance, it may be considered false or misleading to quote a price which is lower than the seller has advised they would accept or a price that the agent does not believe the property would be sold at.
Post by Patrick Piltion