At present there is pressure on purchasers of property to sign the contract to secure the deal. Underquoting refers to the practice where an Agent advertises a residential property for a lower price than the reasonable estimate that was stated in the agency agreement with the vendor. It can also to some degree covers the current practice where a large minimum and maximum price is advertised.
Real Estate Agent requirements
To ensure real estate Agents are compliant, they need to be aware of the following requirements:
- A reasonable estimate of the property selling price should be included in the agency agreement with the vendor.
- There must be evidence to support this reasonable estimate such as recent sales in the area, increases in demand etc.
- The advertisement cannot include vague terms such as “offers above” or “plus” (e.g., $450 000 +) or $800-890,000 when they expect to get offers over this amount.
- If you are advertising within a specified price range, the highest price must not be more than 10% higher than the lowest price.
- The advertisement should always be up to date. If the Agent receives feedback or evidence that leads to a change in your reasonable estimate of sale price, then you need to update all adverts, advise the seller and amend the agency agreement.
- Agents are required to keep a written record of any conversation about the price of the property with a buyer, potential buyer, seller or potential seller. The record should include the address of the property, the price or price range discussed and the date and time of the conversation.
Who is responsible and what are the penalties?
The Department of Fair Trading is responsible for enforcing these laws and will routinely inspect Agents to ensure that they are compliant. If you are found to have broken the law, you will be liable for up to $22 000 in fines and the loss of any commissions or fees earned from the sale of the property concerned.
Therefore, in order to be prepared for these inspections, Agents need to ensure that all agency agreements and advertisements are accurate and up to date. In addition, Agents need to be able to provide a written record of any conversation that has taken place about the price of the property.
If you need help in understanding what a Real Estate Agent must do for you when buying or selling a property, give us a call on 02 8858 3211.