New underquoting laws apply to the sale of NSW residential property from 1 January 2016.
The underquoting reforms are designed to stop real estate agents understating property prices.
An agent is committing an underquoting offence if they state or publish a price for a property that is less than their reasonable estimate of the property’s likely selling price contained in the agency agreement with the seller. This practice of underquoting can cause interested buyers to waste time and money on inspecting properties, getting reports and attending auctions based on misleading estimates of the selling price.
The reforms that were made to the Property Stock and Business Agents Act 2002 provide clarity for buyers, sellers and agents. They address underquoting with:
Agents who commit an underquoting offence may be fined up to $22,000 and could lose their commission and fees earned from the sale of an underquoted property.
Understand more about how the underquoting laws affect you. Refer to our information for buyers, sellers and agents.
Agents and consumers should be aware of how the underquoting laws affect their rights and responsibilities.
Prospective buyers can learn how the new laws help to protect them by visiting our Making an offer page. Refer also to the Protect yourself from underquoting flyer. It has been translated in Arabic, Chinese, Korean and Vietnamese (for more translated publications visit our Community language information web page).
Property owners using an agent to sell their property should refer to our Underquoting information for sellers page. Sellers should also make sure agents give them the Agency agreements mandatory document.
Agents must be familiar with the new Underquoting guidelines for residential property. They explain agents’ responsibilities and actions that breach them. Real estate agencies should refer to the guidelines to maintain proper procedures for agents to comply with the underquoting laws. For more details, refer to our Underquoting page for agents.
Be aware that, simply because a property sells for more than expected, this does not mean underquoting has occurred. Sometimes competitive buyer behaviour can result in a much higher sale price than what an agent could have reasonably estimated. However, the law now requires an agent to be able to show that their estimate was reasonable, up-to-date and evidence-based.
Buying a property is the biggest financial investment most people will ever make. When dealing in the residential property market, sellers (vendors) and potential buyers (purchasers) should be able to expect a real estate agent to market property ethically and professionally.
Potential buyers can spend money and time investigating properties based on the advertised or stated value. There can be significant consumer detriment if that value was not a reasonable estimate of its likely selling price.
A review of the previous underquoting laws found that clearer requirements for agents selling property would better protect consumers in the NSW property market.
The previous arrangements also made it difficult to effectively enforce the laws and penalise agents for underquoting. Now, from 1 January 2016, agents face tougher penalties that apply even if they were not aware of the law, or did not intend to break the law.
The reforms require agents to draw on their skills to make a reasonable estimate of the likely selling price and have honest and fair dealings with all buyers and sellers. The role of the seller's appointed agent to achieve the highest possible price on the property owner's behalf does not mean they should manipulate buyer interest with false price information.
In shaping these laws, NSW Fair Trading assessed how underquoting laws operate in different states.
The reforms were developed in close consultation with stakeholders from the real estate and property sector. Representatives from real estate industry associations contributed to the proposals for reform and gave feedback as the laws were being drafted.
To read the laws in full, access the Act now on the NSW Legislation website.
Consumers can refer to this page for updates. Agents should check they are subscribed to our Property Matters enewsletter so they can receive regular updates.
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