It seems these days that every week there is a new story about a property that sold at auction for close to double its reserved price, which has put the spotlight on the practice of ‘underquoting’ in the real estate industry.
Underquoting occurs where the real estate agent for a property misleads prospective buyers about the likely selling price of a property they have for sale. Any misrepresentation of the expected price a property will sell for in advertising or marketing material, or discussions with prospective buyers can be illegal. This is because the practice of misleading or deceptive conduct is a breach of Australia’s consumer laws and by misleading prospective buyers about a property’s price is a clear example of this type of conduct.
Specific examples of underquoting include where the agent advertises, or advises potential buyers of a price for the property that is either; less than the asking price, or reserve price at an auction, that the seller is willing to accept, or less than the estimated likely selling price for the property.
Real estate agents have an obligation to provide an accurate opinion of the market price of a property and if this changes to update the advertised price, or price guide accordingly.
Where a seller advises their agent of their asking price, or auction reserve price during the marketing campaign for the property, then the agent cannot advertise the property below this price at any point.
The practice of underquoting gives the entire real estate industry a bad name and most agents do not engage in the practice, however there have been several notable examples of it occurring, which is why the Department of Fair Trading in New South Wales has introduced proposed new legislation aimed at stamping out the practice.
Underquoting at the moment is seen as more of a problem in New South Wales, especially Sydney, as property prices have soared, but it has been known to occur in Queensland as well and it will be interesting to see if the Queensland Government, or the Real Estate Institute of Queensland (‘REIQ’) makes any moves similar to New South Wales.
As the seller of property it is important that in selling your property you ensure that it is advertised at a fair price and not underquoted in order to entice buyers who may not ultimately be able to afford to purchase the property.
Some practical tips to avoid any claims of underquoting include:
- Researching the market value of your property, looking at past sales in the area; or
- Asking the agent to justify the price estimate they have provided to you.
If you are looking to sell your property, the conveyancing solicitors of Dylan & Inns Gold Coast and Brisbane can review the contract of sale and any agreements with real estate agents prior to you signing these, in order to ensure that your legal obligations to a potential buyer are met.