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Key points
- Home buyers are concerned about the prevalence of underquoting and the complaints process.
- The practice is illegal, and wastes the time and money of house hunters.
- Buyers and experts say more needs to be done to restore confidence in price guides.
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Home buyer John Slater was the only bidder on a northern beaches property last year, and he still missed out.
Slater’s bid of $2.1 million was knocked back, and the Allambie Heights property passed in on a vendor bid of $2.5 million.
Home buyer John Slater missed out on a northern beaches property, despite offering to pay above the price guide. Credit: Ben Sarcy
The price guide had been $2.2 million, revised down from an initial $2.4 million. He increased his offer post-auction to $2.35 million, but was told the vendors wanted at least $2.5 million. He realised he never stood a chance.
He even complained to NSW Fair Trading but was disappointed by the response.
Sydney property buyers are raising concerns about the prevalence of underquoting, the complaints process, and laws that permit questionable behaviour.
Quoting below what the property is worth or what the vendor is willing to sell for can attract more buyers, but leaves many frustrated to realise they wasted time and money on inspections and building reports for a property they could never afford. It can also be hard to prove, especially in rising markets, and a stronger-than-expected sales result is not necessarily underquoting.
Underquoting means making a statement about a property price that is less than a real estate agent’s reasonable estimate of the property’s likely selling price. This estimate is recorded in the agency agreement between agent and seller and can be a single price or a 10 per cent range.
The reserve – the price the owner is willing to sell for – can be set regardless of the estimated price. Neither figure has to be made public.
A property does not have to be advertised with a price guide, but if it is, the guide must be based on factors such as recent comparable sales and market conditions, and be updated based on buyer feedback if needed.
Sydney home buyers have become accustomed to adding sizeable sums onto advertised price guides for homes going to auction.Credit: Peter Rae
Slater, a long-term northern beaches resident who temporarily relocated to Adelaide, spent thousands of dollars on flights, car hire, solicitors’ fees and pest and building reports, for a property for which he was never in the running.
“When I went to Fair Trading, they said this is not underquoting because the property didn’t sell; it was almost like, ‘computer says no’,” he said.
The property he missed out on never sold, and was withdrawn from the market.
Underquoting is illegal and the laws were strengthened in 2016, but still contain loopholes. Agents face fines of up to $22,000 if successfully prosecuted and may also lose commission, but neither penalty has ever been imposed. Instead, agents have been issued penalty notices of $2200.
The commission that agents stand to make varies, but an agent charging 2 per cent commission would earn $20,000 for selling a $1 million home.
NSW Fair Trading has received 596 complaints about underquoting from 2019 to date, and has issued 348 fines off the back of complaints and compliance operations. Since January, 51 complaints and 43 penalty notices, totalling $94,600, have been issued.
Dozens of Sydney buyers told this masthead they had no faith in price guides and were accustomed to adding sizable sums on top, some at the advice of agents who admitted a property should sell above their guide.
Some buyers questioned how they could tell when a price guide was way off the mark, but experienced agents, with access to data, purportedly could not. Very few had lodged an official complaint, lacking faith in the process.
A NSW Fair Trading spokesman said underquoting was monitored during general real estate checks and targeted operations, including inspections of sale records and undercover monitoring of campaigns. More than 180 inspections have been conducted since January.
Reducing misleading representations by agents was a priority for Fair Trading, he added. All complaints were assessed carefully, and recorded to monitor future conduct, but could be finalised with no action if they could not be substantiated.
Agents caught underquoting could be given educational advice, a warning, penalty notice or face prosecution.
Fair Trading and Better Regulation Minister Anoulack Chanthivong was unavailable for an interview, but provided a statement saying it was a priority for Fair Trading, which had cracked down on misleading conduct and would continue to look at ways to improve.
He declined to answer detailed questions but urged those who believe they had been misled to make a complaint.
“It marks the agent for closer scrutiny in the future and along with spot checks it’s a critical part of helping to stamp out this unacceptable behaviour,” he said.
Industry stalwart Henny Stier, principal buyer’s agent at OH Property Group, has made multiple complaints to Fair Trading about underquoting, but said they went nowhere.
“There has not been a single investigation into anything that was complained about. It was such a futile exercise,” Stier said.
OH Property Group’s Henny Stier has made multiple complaints about underquoting to Fair Trading to no avail.Credit: Dion Georgopoulos
Agents who do the right thing are then left behind, she said, as they risk losing buyers to competitors who underquote.
“Because of this, it’s become quite systemic,” she said.
Stier said loopholes include agents not accepting offers before auction so they are not legally required to revise their price guides, using outdated comparable sales, or communicating verbally with buyers to avoid a paper trail.
She was among more than two dozen buyer’s agents this masthead spoke to, most of whom felt underquoting was common. Few had complained, concerned it would sour a relationship with an agent, or result in nothing more than a slap on the wrist. Those who did were disappointed by Fair Trading’s response, some adding it was under-resourced.
Buyer’s agent Lauren Goudy has previously complained about underquoting, but was disappointed by the outcome.Credit: Peter Braig
When buyer’s agent Lauren Goudy, of Rose & Jones, presented a “cut-and-dried case” of underquoting to Fair Trading a number of years ago, she was disappointed.
An agent had formally knocked back a client’s offer, but continued to advise buyers of a lower price guide.
Sydney buyer’s agent Paul Mulligan believes underquoting is rampant.Credit: Peter Braig
“[Fair Trading] said they just gave the agent a warning. There was no fine, there was nothing.”
Buyer’s agent Paul Mulligan, founder of Mulligan Property Acquisitions has also made complaints, but to the best of his knowledge none resulted in a penalty.
“They tell you they can’t say anything [about the outcome] because it’s an ongoing investigation and it could compromise their processes,” Mulligan said.
“How to actually lodge a complaint [isn’t clear on] their website I went to, and was like, ‘How the f— do you do this?’ If I can’t do this, what hope has the consumer got?”
Mulligan believes underquoting is rampant, and the practice disadvantaged those agents who did quote honestly.
On the selling side, Smyth Estate Agents director James Smyth has complained “more than a couple of times” about underquoting, which he said undermined the work of agents who tried to quote accurately.
“I do see a lot of very cheeky guides that are quite misrepresentative,” he said.
When Smyth has lodged complaints, he has been disappointed by the result.
He said few buyers complained as they were busy or worried about getting an agent offside.
Sydney first home buyer Carolien Waterman, who has been searching for some months, has not complained about inaccurate guides and questions how doing so would make a difference for a buyer who has missed out on the property and is looking for the next.
First home buyer Carolien Waterman is sick of seeing agents underquote property prices.Credit: Ben Symons
Waterman missed out on a one-bedroom apartment that was guided at $575,000 and sold for $721,000.
“I would have rather … spent my time in a productive way than going to an auction where you are already losing before it starts,” she said.
Good Deeds Property Buyers founder Veronica Morgan decided against lodging a complaint, after she called Fair Trading about a “blatant” case of underquoting.
Her clients made a pre-auction offer about $500,000 above the price guide for an Ashbury home, but were unsuccessful. Rather than knocking the bid back, and revising the guide, the agent said they could not accept pre-auction offers.
Good Deeds Property Buyers founder Veronica Morgan called Fair Trading about a blatant case of underquoting, but got the strong impression it wouldn’t go anywhere.Credit: Louise Kennerley
“[I called Fair Trading and] they talked me through the process and I decided not to complain. I got the strong impression it was going to go nowhere,” she said.
Real Estate Institute of NSW chief executive Tim McKibbin said it was disappointing that some agents engaged in the illegal practice, but it was not as widespread as consumers believed.
“[But] the current response to the problem clearly isn’t working. I think there needs to be a rethink of how we take this problem on, both from a compliance and perceptions perspective.”
McKibbin said REINSW wanted to work with Fair Trading to lift industry standards and consumer confidence, but he said buyers should dedicate time and resources to do their own due diligence.
How to make a complaint about underquoting
You can also make your complaint by mail or you can call 13 32 20 to discuss how to make a complaint.
NSW Property Services Commissioner John Minns, tasked with raising industry standards and improving Fair Trading’s regulatory powers, was not convinced underquoting was widespread.
“From 51 complaints [this year], the likelihood is there’s probably only a handful of actual [cases] … that’s not evidence of a rampant issue with underquoting,” he said.
However, it was still an issue he took seriously, regularly meeting Fair Trading’s investigations and enforcement team.
He did not want penalties seen as the cost of doing business but also noted investigators had to carefully weigh up the benefit for consumers of taking an agent to court.
Opposition Fair Trading spokesman Tim James called for a review into the legislation that allows price guides and reserves to be set separately, and acknowledged buyers’ concerns around the current system, which the opposition set up, and Fair Trading’s ability to deal with the extent of underquoting.
“Fair Trading needs to be very engaged and in touch with the market to be able to establish whether the present provisions are working. I certainly have a concern in relation to them,” James said.
“When you’ve got obviously such a level of concern out there, I mean that warrants a review … we’re not afraid to call for that.“
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