What is underquoting & how to report it?
REALas readers often tell us how frustrated they are with Australia’s auction process and underquoting. With many of you spending months attending auctions where the sales price soared tens of thousands over the advertised price range. And even more frustrating, when your bid gets rejected for being below the vendor’s reserve price, even though it’s above the real estate agent’s quoted range.
— kellabrations (@kellabrations) June 17, 2015
It’s no wonder you walk away feeling like your time has been wasted. You’ve been cheated. And you’re completely powerless.
What is underquoting?
Underquoting is a nasty little trick some real estate agents use to lure you to a property – the whole ‘quote ‘em low, watch ‘em go’ philosophy.
Just to make the definition clear, underquoting happens when a real estate agent ‘advertises or advises a prospective buyer that a property is available for sale at an amount that is less than the vendor’s asking price or auction reserve price.’
What’s more, it’s illegal.
The Australian Consumer Law (ACL) and the Estate Agents Act 1980 (EAA) prohibit real estate agents ‘making representations about property prices that are false or misleading, or are likely to mislead or deceive. Underquoting the likely selling price of a property for sale to a prospective buyer is false and misleading and in breach of the ACL and the EAA.’
So, how do so many real estate agents get away with it?
The problem is, underquoting is difficult to prove. Gaps between the quoted range and the reserve can be waved off under the excuse that the property received ‘higher demand than expected’ or ‘the vendor changed their mind and upped the reserve at the last minute’. Vendors aren’t completely blameless – they generally know when their property is being advertised below their reserve price, but many of them are unaware this is an illegal tactic.
What can you, the home buyer, do about underquoting?
We’ll be honest and tell you that existing laws are fairly vague at present and need stronger enforcement. There are huge fines in place for agents who breach real estate regulations, but to highlight what you’re up against, the NSW government (for example) recently admitted there hasn’t been a fine on an agent for underquoting since 2004.
That being said, you’re not completely powerless. The easiest action you can take is to ask the selling agent for the reserve of the property you’re interested in. Even better, get it in writing. They’re not required to tell you by law, but an honest sales agent, after all, should have nothing to hide. What’s more, you’ll be placing them under pressure by asking.
Secondly, become familiar with real estate agent obligations under federal, state and territory laws. If we educate ourselves about our rights as buyers, we’ll more easily be able to detect unlawful selling tactics by agents. We’ll be able to take more control and demand clearer transparency for accurate price predictions.
If you’re convinced a real estate agent has underquoted, keep a record of the price range you were given and lodge a complaint to your relevant state Fair Trading or Consumer Affairs department. Different processes apply in each state, but these offices are responsible for upholding compliance with the law. Whether action can be taken often depends upon the impact on the buyer and the seriousness of the breach.
The good news is, your frustrations are not unnoticed. Government departments are cracking down on acts of underquoting, conducting random inspections of real estate agencies and reviewing documentation. There are talks of setting up special hotlines for complaints and NSW Fair Trading recently introduced penalties of up to $22,000 for underquoting agents. What’s more, some of the more forward thinking real estate agents are leading the way to better practices by revealing their reserves while providing some valid arguments for doing so. Melbourne real estate Agent, Paul Caine, insists that if the reserve was revealed,
“You’d have the right people in the right place if they all knew where they should be.”
There’s still a long way to go, but by reporting acts of underquoting you’re putting pressure on state governments to do something about it.
REALas’ aim to help you as much as possible by spotlighting real estate agencies which quote inaccurately and continuing to improve the accuracy of REALas price predictions.
Let us know what you think, should agents reveal reserve prices prior to auction?