I support any regulation that increases transparency in real estate transactions and improves the perception of our industry in the eyes of the public. The new legislation attempts to provide more clarity around what constitutes under-quoting, so I’m broadly supportive.
I’m not suggesting this practice of under-quoting never happens however, is it a widespread problem in NSW – the answer is no. Why do I say that? Fair Trading do a great job protecting consumers’ rights and they’ve been looking at this issue for years. Section 73 of the Property, Stock and Business Agents Act 2002 (The Act) makes underbidding an offence. Sections 51, 52 and 53 create offences for false statements or misleading and deceptive statements. Yet despite exceptionally strong market growth since September 2013, I can only find one case involving underquoting, brought by Fair Trading NSW.
Agents have, for many years been required to substantiate selling price estimates with comparable data. I’ve been audited in the past and have provided examples which were acceptable to Fair Trading. Agents have also been required not to quote a price which is below the lower price of the estimated range on the agency agreement.
So why has this become a big issue?
Let’s look at possible causes: the agent/seller negotiation, a rapidly rising market and the emotional roller-coaster of buying a home. Firstly, sellers obviously want maximum value for their property, which is a reasonable expectation. The agent’s role is to provide advice on how the market will value the property. If these two figures are substantially different there is potential for under or over-quoting. Secondly, if 15 bidders register for an auction where the guide was $1m and the property sells for $1.3m, this is not proof of the agent being misleading. Agents are not in control of buyers, and where there is increased demand and volatility (such as we’ve been experiencing in Sydney) this will ultimately put upward pressure on prices. The agent would have provided a price guide based on where they considered the market price to be. And lastly, most of us have experienced the emotional stress associated with buying a home. The frustration many of us have felt when we miss out on a property is often directed at the agent. I believe this is also fuelling the perception that underquoting is more prevalent than the facts suggest.
So what can buyers do?
Buyers in 2015 have more tools at their disposal than ever before, there are a plethora of apps and websites that show area sales and provide range estimates for particular homes. These are all free and easily accessible so take advantage and use them to formulate your own price guide. When attending open houses be wary about receiving verbal advice. If you’re interested in the property then follow-up and ask for advice in writing. Also ask the agent for the vendor’s price expectation, what other buyers’ feedback has been, how many interested parties there are and whether they’re around the same price?
One of the core values I set for Team Curran, was to maintain the highest level of ethical standards. So I’m supportive of any legislation that seeks to improve those standards across our industry. I hope the increased focus on this issue provides greater clarity and transparency for both agents and clients.