Most homebuyers are familiar with the phrase ‘underquoting’ – a practice carried out by real estate agents while marketing a property in order to attract a larger pool of prospective buyers and create a greater sense of competition for the property.
The majority of agents act in good faith and take a far more honourable approach to marketing properties, however unfortunately – and despite recent reforms put in place in both New South Wales and Victoria to crack down on underquoting – it still happens within Australia’s real estate industry.
Underquoting, also referred to as ‘bait pricing’, creates frustration among both parties, but particularly buyers who get their hopes up about buying a property they think is within reach, only to be outbid or disappointed at auction.
Underquoting laws are now in place to help ensure homebuyers don’t waste time, money and a lot of effort. Picture: AAP/Glenn Hunt
Cracking down
Regulating underquoting is the responsibility of the consumer body in each state, for example NSW Fair Trading in New South Wales and Consumer Affairs Victoria (CAV) in Victoria.
Leading the way, NSW Fair Trading introduced new underquoting laws applying to the sale of NSW residential properties back in January 2016.
Thanks to the reforms, real estate agents in NSW must now quote prices within 10% of the lowest figure, which helps ensure that homebuyers are not mislead to invest in a property that is out of their price range. Agents who do underquote may not only lose their commission, but they may also face fines of up to $22,000.
Additionally, advertisements that feature the terms “offers over” or “offers above” are now prohibited in NSW.
CAV introduced a raft of changes to residential real estate pricing legislation from May 2017, including a requirement for all homes listed for sale in Victoria to have an estimated price, as well as three recent comparable sales for buyers to review and the suburb’s median house price.
The legislation also disallows the use of price ranges with more than a 10% margin between the two figures, and those with no upper limit, such as “offers above”.
Buying a home is one of the biggest decisions we make in our lives and underquoting muddies the waters and creates distrust between agents and buyers.
The laws regulating underquoting will help ensure house hunters don’t waste time and money on properties they can’t afford, but it still pays to do your homework.
Do your research and talk to a property expert who isn’t connected to the sale for an unbiased estimate. Picture: Getty
How to protect yourself from underquoting
- Research comparable sales: Check out up-to-date property reports and suburb profile reports detailing the sale prices and auction results of neighbouring properties, making sure you only consider the data of comparable properties.
- Consult professionals: Chat to real estate agents or buyers’ agents who aren’t involved in the sale of the property and ask them for a true estimate of the sale price. Speak with local residents familiar with the area, particularly those who’ve recently moved there.
READ MORE: Victorian underquoting laws save time and money for buyers
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The Property Couch provides a general opinion based on current market conditions. These opinions should not be treated as investment advice. Always obtain advice based on your individual circumstances.
