Underquoting guidelines tell NSW estate agents to advise likely sale price adjustments in writing

NSW Fair Trading has reinforced its underquoting guidelines to estate agents as to what defines underquoting. The guidelines say that agents are liable for a $22,000 penalty if they give a false oral or written estimate to a buyer or seller.

Agents must satisfy three tests with their estimates: 1) they must believe the quoted price is realistic; 2) they must be able to substantiate it; and 3) it must reflect the expectations of the vendor.

Agents have the following general responsibilities under NSW’s real estate laws when selling or marketing a property: 

• to make honest and reasonable estimates of selling prices 
• to keep records to demonstrate what information they relied on to make those estimates
• to keep records of any discussions where those estimates are revised.

NSW Fair Trading department says purchasing a property is the biggest financial investment most people will ever make.

"While the majority of real estate agents act ethically and in accordance with the laws, it is important that potential risks of consumer harm be appropriately managed.

"NSW Fair Trading is concerned with what appears to be a marketing technique where real estate agents and their employees underquote property prices to increase the 
pool of prospective purchasers.

"This document gives further guidance on the applicable laws, and highlights specific conduct in the sale of residential properties that is not considered to be best practice.

It also includes general guidance on what type of conduct may be considered best practice.

"NSW Fair Trading has made these suggestions to help agents develop their own procedures. They should not be considered ‘minimum standards’."

NSW Fair Trading considers the estimated selling price recorded in the agency agreement is the agent’s true estimated selling price, at least initially. This view is supported 
by section 73(4) of the Act which states: A statement in the agency agreement of the agent’s estimate of the selling price of residential property is evidence for the purposes 
of this section of the agent’s true estimate of that selling price. 

If an agent represents an estimated selling price in the agency agreement that is not consistent with their own opinion or estimate of the likely selling price for the property, 
this may be considered a false or misleading representation which is an offence under sections 51 or 52 of the Act. If an agent or their employee makes a statement in the 
course of advertising a residential property for sale that is less that the agent’s true estimated selling price as recorded on the agency agreement, an offence may have been 
committed.

When determining or updating their estimate of the selling price of a property, Fair Trading says an agent should have regard to the following matters: 

• the factors the agent may have specifically considered in arriving at the estimate in the agency agreement 
• any sales of comparable properties 
• any representations made to the vendor by the agent, including representations about the price (or range) to be used when advertising the property for sale 
• the vendor’s expectations (any reserve bid and/or the price or range at which the vendor is willing to consider offers) 
• feedback from potential purchasers 
• any current or relevant valuations provided in respect of the property 
• the characteristics and features of the property, such as its size and location, including the existence of any ‘material facts’ 
• They must exercise reasonable skill and care in providing their estimate, considering all information that is likely to be relevant. 

NSW Fair Trading may consider enforcement action, including penalty infringement notices and prosecution, against any agent who markets a property at an estimated selling price less than the agency agreement estimated selling price. Agents should keep the vendor informed in writing of any changes in their opinion of the likely selling price of the property.