Victor Dominello, the Minister for Better Regulation, has said that reforms to rules surrounding underquoting would provide “clarity” for agents, vendors and buyers.
NSW Fair Trading defines under-quoting as making “a statement in the course of advertising a residential property for sale that is less than the agent’s true estimated selling price as recorded on the agency agreement”. Currently penalties for engaging in underquoting are fines of up to $22,000.
Estate Agents Co-operative (EAC) has been working with and provided advice to the Real Estate and Property division of NSW Fair Trading on the new reforms.
The new reforms, which have been introduced to parliament and are expected to commence in early 2016, will see stricter rules for agents in regards to the estimated selling price in their agency agreements. Agents who do not adhere to this estimated price in advertising will face losing fees and commissions. Further to this, phrases such as “offers over” or “offers above” or any similar phrase will also be prohibited in advertising.
The proposed underquoting reforms will ensure any estimated price communicated to vendors and prospective buyers represents what an agent actually expects a property to sell for.
Under the proposed reforms, an agent must:
- Include their true estimate of a property’s likely selling price in the agency agreement (also called the sales agreement).
- Record the evidence that informed this estimate and provide it to the vendor in writing.
- Ensure a price range is no greater than 10% of the bottom figure (eg. $500,000-$550,000).
- Record all price estimates (quotes) provided while a property is marketed.
- Ensure their price estimate remains realistic by updating it and advising the vendor in a timely manner if they are aware – or should reasonably be aware – of evidence or circumstances that changes it. The agent must advise the vendor of their revised selling price estimate and the evidence on which it is based in writing (eg. email) and amend the agency agreement. They must also update, as soon as feasible or practical, any marketing of the property that reflected the old estimate with the new selling price estimate.
Agents will not be able to:
- Provide any price estimate less than what they have assessed a property is worth (as recorded in their agency agreement with the vendor). This applies whether the agent is advertising the property or in any communication with prospective buyers about the property’s likely selling price.
- Advertise vague price information, including any statements such as “offers above” or “offers over” an amount, or “plus” a particular price (eg. $500,000+), which could misrepresent or obscure a property’s estimated value. Also, an agent must never indicate a selling price estimate that does not match the agent’s true estimate.
- The reforms will introduce stronger penalties to deter underquoting. This includes fining agents up to $22,000 if they breach the new requirements. Agents could also have to forfeit their commission and fees if found guilty of underquoting. These commissions and fee payments will go towards the Property Services Compensation Fund, which supports consumers who have experienced financial loss as a result of property agent misconduct.
Mr Dominello’s office has also made clear that there have been 263 complaints about underquoting in the past two financial years. With 63 of these complaints being made in March 2015.
“In light of a volatile market agents should be reviewing their estimates and any marketing to reflect any change to the price estimate as a result of market or vendor feedback. We welcome the reforms announced by the Minster and feel they will make clear to agents as well as to consumers, the responsibilities when making these estimates,” said Mr David Crombie, CEO of EAC. “However, EAC is also of the view that there is a very small amount of agents who engage in fraudulent behaviour and whilst some do so maliciously, we also believe that many are doing so due to poor education on the subject.”
EAC has been working with NSW Fair Trading on a range of items around underquoting, including the Underquoting Guidelines which were released in May this year.