Property 101: Underquoting laws in NSW

Property 101: Underquoting laws in NSW
Property 101: Underquoting laws in NSW

Underquoting laws start from 1 January 2016. They apply to all residential properties for sale on or after 1 January 2016.

An agent is underquoting the selling price of a property if they make or publish a statement about its price that is less than their reasonable estimate of the property’s likely selling price that is contained in the agency agreement.

This is an offence under the Property, Stock and Business Agents Act 2002 (the Act). Agents face fines of up to $22,000 for failing to comply with the law. Agents may also lose their commission and fees earned from the sale of an underquoted property. These commissions and fee payments will go towards the Property Services Compensation Fund, which supports consumers who have experienced financial loss as a result of property agent misconduct.  

Know your responsibilities – read the Underquoting guidelines

Agents should make sure they are carrying out their new obligations by downloading Fair Trading’s Underquoting guidelines for residential property.

Key requirements 

An agent should never state or publish an estimated selling price that is less than what is in the agency agreement.

An estimated price communicated to sellers and potential buyers must represent what an agent reasonably believes a property is likely to sell for. An agent and seller can choosenot to publish or make any statement about the likely selling price of the property. However, if they do publish or make any statements about price, they must comply with the new requirements.

As an agent, you must:

  • include your reasonable estimate of a property's likely selling price in the agency agreement (also called the sales agreement)
  • provide evidence to the seller of how you estimated the selling price
  • ensure the highest price in a price range does not exceed the lower price by more than 10% (for example, $500,000-$550,000)
  • record in writing statements made about the price while a property is marketed
  • ensure your estimated selling price remains reasonable by:
  • revising it as soon as you know (or should be aware) of evidence or circumstances that changes it
  • notifying the seller of the revised price
  • amending the agency agreement with the revised estimate
  • take all reasonable steps as soon as is practical to update any marketing of the property with the revised estimated selling price.

You must not:

  • provide any price estimate less than what you have reasonably estimated that a property is worth (as recorded in the agency agreement with the seller) - this applies to advertising the property or in any communication with prospective buyers about the property's likely selling price
  • use any statements such as "offers above" or "offers over" an amount, or "plus" a particular price (for example, $500,000+), which could underquote or obscure a property's estimated value.


Questions and answers about underquoting 

Do the laws apply to properties sold before 1 January 2016? 

No. The underquoting requirements apply to all residential properties for sale on 1 January 2016 and into the future. However, if you have already entered into an agency agreement with a seller before 1 January 2016 and the agreement is still operating, then you will not have to comply with the requirement to update your estimated selling price, however you may wish to do this as a matter of good practice.

You must still comply with all other requirements for advertising and making statements about your estimated selling price as it currently appears in the agency agreement, as well as all the new record keeping requirements. That means that if you have properties advertised for sale at a price that is less than the estimated selling price in your agency agreement, then you must take all reasonable steps, as soon as is practical, to change or withdraw those advertisements. This includes flyers and any other printed material and all online material.

All agency agreements entered into on or after 1 January 2016 must comply with all the new requirements.

I used to advertise ‘offers over $890K’ for a property when my estimated selling price was $900,000-$990,000. Can’t I do this?  

No. Statements such as ‘offers over $890K’ and other statements like ‘offers above’ or ‘$890K plus’ do not provide buyers with enough information to determine whether the property is within their price range. At worst, such statements can mislead buyers by indicating that a property could likely sell for the minimum offer advertised when the property will likely sell for much higher.

Remember that from 1 January 2016, you must not:

  • do any advertising that includes such references (for example ‘offers above $900,000’, ‘offers over $900,000’ or ‘$900,000+’)
  • indicate a selling price that is any lower than the reasonable estimated selling price as recorded in the agency agreement.

The requirements make sure consumers don’t waste money and time on property inspections by banning any price information that underquotes an agent’s estimated selling price.

The seller wants me to advertise a lower price than the estimated selling price to attract market interest. What should I do? 

You should make sure that the seller is aware of your legal obligations to never indicate a selling price lower than your estimated selling price. Your role is to get the seller the highest possible price for the property through fair, effective marketing and enabling competition between buyers for whom the property is likely to be affordable.  

You may wish to direct the seller you represent to the Fair Trading website or supply them with Fair Trading information on the underquoting reforms. This should help them to understand the purpose of the underquoting laws and the consequences if you illegally underquote a property.

You must also take the time to explain how you arrived at the estimated selling price for their property and provide evidence for why this is a reasonable estimate of the likely selling price.

What if the seller wants more than I think is the estimated selling price? 

If the seller wants to sell the property for more than your estimated selling price, you may choose to:

  • advertise at a higher price that meets the seller’s instructions.
  • decide not to disclose any price.

As long as you do not advertise or disclose any price that is less than the estimated selling price in the agency agreement, then underquoting has not occurred.

You should also let the seller know that the following pricing statements may be considered false or misleading under the Australian Consumer Law:

  • quoting the estimated selling price where the seller has advised that they will only sell for a higher price
  • advertising a property at a price that is less than a previously rejected offer (unless the seller is now prepared to accept a lower offer).

Why does the estimated selling price need to be up-to-date?  

The laws recognise the dynamic market forces in the real estate sector and require agents to review and amend their estimate in line with market feedback and other relevant factors impacting a property's likely selling price.

Agents must not continue to market a property at an estimated selling price that they know, or should know, is no longer a reasonable estimate. Agents must: notify the seller if they revise their estimated selling price, provide evidence of the reasonableness of the revised estimate, amend the agency agreement (the seller’s consent is not required to do this) and take all reasonable steps to update their marketing materials as soon as is practical.

What should I consider a reliable offer, and when should it influence the estimated selling price?  

You should request all offers in writing. If you consider that any offer or offers received changes the likely selling price of the property, you should revise your estimated selling price. Be sure to amend the agency agreement and advise the seller in writing, providing them with the evidence of the reasonableness of your revised price estimate.  

The local newspaper has gone to print with my previous estimated selling price. Am I breaching the laws? 

Certain updates may not be possible but you must be able to demonstrate that you have made reasonable attempts to update any marketing material that no longer shows your reasonable estimated selling price.

It may not be practical to retract published newspaper advertising. However, if you have the opportunity to update price information before it is printed, or can update any online marketing for the property, you must do so as soon as is practical.

How can I market multi-unit residential property or multi-lot residential subdivisions? 

If you give any price indication about the properties’ likely selling prices, any advertising you do must include the following: the estimated selling prices for the lowest and highest priced properties in each category of unit (eg. studio, one bedroom, two bedroom etc.).

Advertisements for multi-unit property marketed collectively can do this in two ways:

  • giving the price ranges for each category, with the low end of the range being the estimated selling price of the lowest priced unit in the category and the higher end of the range being the most expensive property in that category. For example: one bedroom units available - price range: $550K-$700K. In this example, $550K represents the estimated selling price of the lowest priced one bedroom unit and $700K is the estimated selling price of the highest priced one-bedroom unit. This would need to be done for each category. 
  • stating the estimated selling price in the agency agreement of the lowest and highest priced units for each property category (instead of using the ‘range method’ above). For example: one bedroom units available - the lowest priced unit is $550K, the highest priced unit is $700K; two bedroom units available - the lowest priced unit is $700K, the highest priced unit is $900K.

Note that the range advertising method described above is for properties being marketed collectively. Therefore, it does not breach the requirement related to estimated selling prices expressed as a range, which is for single properties.

Multi-lot subdivisions would need to include the lowest priced lot and the highest priced lot.

Any collective marketing of residential units/lots that includes a price indication should also advise prospective buyers that there are multiple properties within each category, of varying prices within that range.

To avoid underquoting, all advertising and marketing must be updated to reflect the value of the new lowest price unit/lot available when:

  • the lowest priced unit/lot is sold 
  • the last of the lowest priced units in the price range for a particular category is sold.

Be aware that some previous practices are now illegal, such as a billboard promoting off-the-plan residential property that states: 'From $400,000'.

Also, it would be against the law to promote a range such as 'property available from $400K-$2.2M'. This does not give a meaningful indication of the price ranges for each category of residential units/lots being collectively marketed.     

Can I choose not to reveal a price when collectively marketing multi-unit residential property or multi-lot subdivisions?  

Yes. Potential buyers can simply be advised to contact the agent for further information. Remember that agents cannot give any price indication (verbal, written or advertised) for a property that is LESS than that specific property’s evidence-based estimated selling price.

How should I record estimated selling prices for multi-unit property and multi-lot subdivisions?  

Attached to the agency agreement, the agent may include a schedule of the lots with their individual prices, or properties available with their features (primarily bedroom numbers) and a price for each. Any prices included in the schedule cannot be less than the estimated selling price for each unit/lot.

What if I am unfairly accused of underquoting? 

To help consumers understand what underquoting is, you can direct them to the Underquoting reforms web page on the Fair Trading website. This will give them an overview of the new laws and point them to the information relevant to them.

Consumers can also speak to a Fair Trading officer on 13 32 20.

If you have complied with all the requirements expected of agents under the Act, then you will not be at risk of breaching the underquoting laws.

What will happen if Fair Trading determines that I have underquoted?  

Fair Trading can issue you with a penalty infringement notice of $2,200. Depending on the circumstances it could also be grounds for Fair Trading to take further disciplinary action on your licence. If the matter is prosecuted and you are found guilty of underquoting, you will pay a fine of up to $22,000. You may also lose the full commission and any fees for the property or properties you have underquoted.  

What about when I talk to a potential purchaser on the phone or at an open house? 

If you make a statement about a residential property’s likely selling price in marketing that property to a buyer, potential buyer, seller or potential seller, you must make a written record of the statement.

The record of the statement must contain:

  • the address of the property concerned
  • the price or price range
  • the date and time of the statement.

For more information, click here.

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