- Underquoting refers to advertising the price of a property for lower than what would be accepted
- Practice is used illegally to drive interest for a property
- Illegal under consumer law with most states and terrorizes having extra regulations in place
The Real Estate Institute of Australia (REIA) has reminded agents and customers alike that under federal consumer law it is illegal to underquote.
Underquoting can arise in a fast-rising property market where competition for property listings is high – which is what is happening across Australia at the moment.
By definition, underquoting involves the price of a property being knowingly advertised less than the true value of the home as a way of driving interest.
“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,” said the statement from the REIA.
“The potential buyer is then quickly left out of the running as the true value of the home is reflected in the bidding.”
What extra rules do the States and Territories have?
In the ACT under the Agents Act 2003, an offence is committed when an agent either publishes a misleading statement, is reckless in ensuring a statement is not inaccurate and omissions of information that causes a statement to be misleading. Unlike other states, ACT’s price guides are not restrictive – a reserve price can be set on the day of an auction.
In NSW, agents cannot give consumers understated or vague property prices, such as “offers above $1 million”. During an inspection by NSW Fair Trading, agents must provide appropriate documentation to show they have followed relevant laws. Fines – and even losing all commission and fees – can be a consequence of selling an underquoted property.
In the Northern Territories, misleading advertising is illegal, but there is no comprehensive legislation relating to underquoting although Consumer Affairs regularly audits ‘bait advertising’.
In Queensland, agents cannot represent a property for sale at a price the vendor will not accept, therefore if the phrase “offers over” is used, the price must be the minimum amount the vendor will accept. Penalties for bait advertising are harsh: up to $10 million, three times the value of the benefit received or 10% of the agency’s annual turnover over the past 12 months.
In South Australia, property prices can’t be advertised as ‘plus/+’ or ‘mid 400s’ but ranges are okay. Agents cannot change the estimated selling price once the agreement has been set. The final reserve for an auction cannot be over 10% the estimated selling price per the sales agreement. Additionally, an advertised price must be a price the vendor is willing to accept and meets current market conditions.
In Tasmania, the laws are also rather vague, much like the NT.
Victorian agents are required to show a ‘Statement of Information’ at all home opens, on an online listing and to a potential buyer within two business days of request. The statement includes the indicative selling price or a price range up to 10%. The price cannot be below the agent’s estimate, sellers asking price or a rejected offer.
West Australia’s underquoting laws are also vague, but an agent must provide reasons when presenting an indicative estimate of a property to a seller.
