WHAT AGENTS & CUSTOMERS NEED TO KNOW: UNDERQUOTING

May 7th,2021

Underquoting is an issue that arises whenever the market increases and competition for any single property is higher.

Underquoting refers to the practice of knowingly advertising the price of a property for sale on the market as lower than the true value of the home in an attempt to drive interest in the property.

Passing off properties as ‘bargains’ means that potential buyers spend their time researching that property, potentially investing money in property inspections for that home and then either putting in a private bid or attending the auction for the property. The potential buyer is then quickly left out of the running as the true value of the home is reflected in the bidding.

It is against Federal consumer law to underquote, and most states have additional regulations to further discourage the practice.

Excellence in real estate practise and upholding our professional standards are of utmost importance to REIA and our network of REIs. We do not tolerate poor practitioners and encourage customers to consult with their local regulator if they observe bad behaviour.

Click here to contact your State or Territory regulator.

State of the States

 

   Underquoting Laws by State and Territory
   Federal Consumer law makes price misrepresentation illegal for all good and services in every state and territory.
   ACT Access Canberra has defined underquoting as misleading a prospective buyer about the likely selling price of a property. Unlike other states, ACT’s price guides are not restrictive. A reserve price can be set the day of an auction.

According to Agents Act 2003, an offices is committed if:

  • An agent publishes an advertisement that includes a statement which the agent knows to be false or misleading
  • An agent in reckless in ensuring a statement is not inaccurate
  • Omission of information causes a statement to be misleading.

 

The potential penalties for being found to have engaged in misleading and deceptive conduct include fines of up to $220,000 for an individual and $1.1 million for a corporation.
   NSW In 2016, NSW made reforms to Property Stock and Business Agents Act 2002 to provide clearer underquoting rules and more effective enforcement. Laws state that:

  • Agents must not give consumers understated or vague property prices, such as ‘offers above $X’
  • During an inspection by a NSW 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 can be fined up to $22,000 and could lose their commission and fees earned from the sale of an underquoted property.
   NT Misleading advertising is illegal in NT. Traders must ensure the impression they present as to how a good or service is sold must be factual. Consumer Affairs regularly conduct audits of retailer for bait advertising, but does not have any comprehensive legislation relating to underquoting, misleading advertising or bait advertising in property.
   QLD Agents in Queensland are prohibited from representing a property for sale at a specified price while being aware the vendor will not accept that price.

Auctions: agents are banned from making any price guide representations at all to potential buyers.

Properties for sale: if the phrase 'offers over' is used, the price should be the minimum amount the vendor is willing to accept.

According to the Property Occupations Act 2014, bait advertising may face the following penalties:

  • $10 million, OR
  • three times the value of the benefit received,
  • OR where the benefit cannot be calculated, 10 per cent of annual turnover in the preceding 12 months.
  • For an individual a breach of the ACL will attract penalties of up to $500,000 per breach.
   SA
  • Words or symbols such as 'plus/+' or 'mid 400s' can't be used with a single price, but ranges are OK.
  • Agents can't change the estimated selling price on the agreement once it's set.
  • The final reserve set for the auction can't be more than 10% above than the estimated selling price in the sales' agreement.
  • The advertised price must reflect both a price the vendor is willing to accept and current market conditions

According to the Australian Consumer Law, if an agent cannot provide reasons for advertising a property at a certain price, they can face a fine of up to $500,000 for and individual or $10 million for a company.

According to the Land and Business (Sales and Conveyancing) Act 1994, if an agent lists a property below the price the vendor will accept, they may face up to $20,000 in fines or 1 year in prison.
   TAS Tasmania relies on the Australian Consumer Law, by which it's unlawful to make false or misleading representations in relation to price.

Tasmania also has its own Property Agents and Land Transactions Act 2016, which states that:

“a general auctioneer must not represent in any way to someone else anything that the auctioneer knows is false or misleading in relation to the sale of property by auction.
   VIC In September 2019, Victoria revised requirements of Statement of Information forms, requiring agents to present a Statement of Information using the relevant approved form for each residential dwelling they are involved in selling.

This statement must be:

  • Shown at all open homes
  • Shown with online listing
  • Shown to potential buyer within two businesses days of request
  • Updated as needed
  • Include indicative selling price or price range (up to 10%
  • This price cannot be below the agent’s estimate, the seller’s asking price, or of a rejected offer
   WA WA’s underquoting laws are derived from its Real Estate and Business Agents and Sales Representatives Code of Conduct 2016, which requires that:  if an agent presents an indicative estimate of a property to a seller and want to represent that seller on the market, then they need to provide a written statement of the opinion, the reasons for them arriving to that opinion, and information on comparable properties and relevant market information to the seller.

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