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- Home buyers are concerned about the prevalence of underquoting and the complaints process.<\/li>\n
- The practice is illegal, and wastes the time and money of house hunters.<\/li>\n
- Buyers and experts say more needs to be done to restore confidence in price guides.\u00a0<\/li>\n<\/ul>\n
Property listings<\/h2>\n
Home buyer John Slater was the only bidder on a northern beaches property last year, and he still missed out.<\/p>\n
Slater\u2019s bid of $2.1 million was knocked back, and the Allambie Heights property passed in on a vendor bid of $2.5 million.<\/p>\n
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Home buyer John Slater missed out on a northern beaches property, despite offering to pay above the price guide. <\/span>Credit: <\/span>Ben Sarcy<\/cite><\/p>\n
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.<\/p>\n
He even complained to NSW Fair Trading but was disappointed by the response.<\/p>\n
Sydney property buyers are raising concerns about the prevalence of underquoting, the complaints process, and laws that permit questionable behaviour.<\/p>\n
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.<\/p>\n
Underquoting means making a statement about a property price that is less than a real estate agent\u2019s reasonable estimate of the property\u2019s 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.<\/p>\n
The reserve \u2013 the price the owner is willing to sell for \u2013 can be set regardless of the estimated price. Neither figure has to be made public.<\/p>\n
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.<\/strong><\/p>\n
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Sydney home buyers have become accustomed to adding sizeable sums onto advertised price guides for homes going to auction.<\/span>Credit: <\/span>Peter Rae<\/cite><\/p>\n
Slater, a long-term northern beaches resident who temporarily relocated to Adelaide, spent thousands of dollars on flights, car hire, solicitors\u2019 fees and pest and building reports, for a property for which he was never in the running.<\/p>\n
\u201cWhen I went to Fair Trading, they said this is not underquoting because the property didn\u2019t sell; it was almost like, \u2018computer says no\u2019,\u201d he said.<\/p>\n
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The property he missed out on never sold, and was withdrawn from the market.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Agents caught underquoting could be given educational advice, a warning, penalty notice or face prosecution.<\/p>\n
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.<\/p>\n
He declined to answer detailed questions but urged those who believe they had been misled to make a complaint.<\/p>\n
\u201cIt marks the agent for closer scrutiny in the future and along with spot checks it\u2019s a critical part of helping to stamp out this unacceptable behaviour,\u201d he said.<\/p>\n
Industry stalwart Henny Stier, principal buyer\u2019s agent at OH Property Group, has made multiple complaints to Fair Trading about underquoting, but said they went nowhere.<\/p>\n
\u201cThere has not been a single investigation into anything that was complained about. It was such a futile exercise,\u201d Stier said. <\/p>\n
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OH Property Group\u2019s Henny Stier has made multiple complaints about underquoting to Fair Trading to no avail.<\/span>Credit: <\/span>Dion Georgopoulos<\/cite><\/p>\n
Agents who do the right thing are then left behind, she said, as they risk losing buyers to competitors who underquote.<\/p>\n
\u201cBecause of this, it\u2019s become quite systemic,\u201d she said.<\/p>\n
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.<\/p>\n
She was among more than two dozen buyer\u2019s 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\u2019s response, some adding it was under-resourced.<\/p>\n
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Buyer\u2019s agent Lauren Goudy has previously complained about underquoting, but was disappointed by the outcome.<\/span>Credit: <\/span>Peter Braig<\/cite><\/p>\n
When buyer\u2019s agent Lauren Goudy, of Rose & Jones, presented a \u201ccut-and-dried case\u201d of underquoting to Fair Trading a number of years ago, she was disappointed.<\/p>\n
An agent had formally knocked back a client\u2019s offer, but continued to advise buyers of a lower price guide.<\/p>\n
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Sydney buyer\u2019s agent Paul Mulligan believes underquoting is rampant.<\/span>Credit: <\/span>Peter Braig<\/cite><\/p>\n
\u201c[Fair Trading] said they just gave the agent a warning. There was no fine, there was nothing.\u201d<\/p>\n
Buyer\u2019s agent Paul Mulligan, founder of Mulligan Property Acquisitions has also made complaints, but to the best of his knowledge none resulted in a penalty.<\/p>\n
\u201cThey tell you they can\u2019t say anything [about the outcome] because it\u2019s an ongoing investigation and it could compromise their processes,\u201d Mulligan said.<\/p>\n
\u201cHow to actually lodge a complaint [isn\u2019t clear on] their website I went to, and was like, \u2018How the f— do you do this?\u2019 If I can\u2019t do this, what hope has the consumer got?\u201d<\/p>\n
Mulligan believes underquoting is rampant, and the practice disadvantaged those agents who did quote honestly.<\/p>\n
On the selling side, Smyth Estate Agents director James Smyth has complained \u201cmore than a couple of times\u201d about underquoting, which he said undermined the work of agents who tried to quote accurately.<\/p>\n
\u201cI do see a lot of very cheeky guides that are quite misrepresentative,\u201d he said.<\/p>\n
When Smyth has lodged complaints, he has been disappointed by the result.<\/p>\n
He said few buyers complained as they were busy or worried about getting an agent offside.<\/p>\n
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.<\/p>\n
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First home buyer Carolien Waterman is sick of seeing agents underquote property prices.<\/span>Credit: <\/span>Ben Symons<\/cite><\/p>\n
Waterman missed out on a one-bedroom apartment that was guided at $575,000 and sold for $721,000.<\/p>\n
\u201cI would have rather … spent my time in a productive way than going to an auction where you are already losing before it starts,\u201d she said.<\/p>\n
Good Deeds Property Buyers founder Veronica Morgan decided against lodging a complaint, after she called Fair Trading about a \u201cblatant\u201d case of underquoting.<\/p>\n
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.<\/p>\n
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Good Deeds Property Buyers founder Veronica Morgan called Fair Trading about a blatant case of underquoting, but got the strong impression it wouldn\u2019t go anywhere.<\/span>Credit: <\/span>Louise Kennerley<\/cite><\/p>\n
\u201c[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,\u201d she said.<\/p>\n
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.<\/p>\n
\u201c[But] the current response to the problem clearly isn\u2019t working. I think there needs to be a rethink of how we take this problem on, both from a compliance and perceptions perspective.\u201d<\/p>\n
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.<\/p>\n
How to make a complaint about underquoting<\/h3>\n
You can also make your complaint by mail or you can call 13 32 20 to discuss how to make a complaint.<\/p>\n
NSW Property Services Commissioner John Minns, tasked with raising industry standards and improving Fair Trading\u2019s regulatory powers, was not convinced underquoting was widespread.<\/p>\n
\u201cFrom 51 complaints [this year], the likelihood is there\u2019s probably only a handful of actual [cases] … that\u2019s not evidence of a rampant issue with underquoting,\u201d he said.<\/p>\n
However, it was still an issue he took seriously, regularly meeting Fair Trading\u2019s investigations and enforcement team.<\/p>\n
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.<\/p>\n
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\u2019 concerns around the current system, which the opposition set up, and Fair Trading\u2019s ability to deal with the extent of underquoting.<\/p>\n
\u201cFair 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,\u201d James said.<\/p>\n
\u201cWhen you\u2019ve got obviously such a level of concern out there, I mean that warrants a review … we\u2019re not afraid to call for that.\u201c<\/p>\n
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