If you hire an agent to sell your residential property in NSW, underquoting laws will affect how they can market your property.
Before putting your property on the market
You can ask an agent not to reveal the estimated selling price for your property to prospective buyers. This means the agent cannot reveal any price information in advertising, in writing or verbally.
An agent should conduct a marketing campaign that promotes accurate information about the property to attract genuine interest from buyers. An agent must not promote a price for your property as:
- 'offers over' or 'offers above' a certain amount (or any similar statements)
- if their estimate is a range, they can quote that range as long as the higher price does not exceed the lower price by more than 10% eg; $500,000-$550,000
What should I expect of my agent?
If you engage an agent to sell a residential property in NSW, the agent must:
- include an estimated selling price for your property in the agency agreement and provide you with evidence for that estimate
- the estimate can be a single price or a price range as long as the higher price in the range is not greater than the lower price by more than 10 percent
- The agent must notify you in writing if they revise their estimate, provide evidence for that revision and amend the agency agreement (they do not need your consent to amend the agreement to include their revised estimate).
If you are in an agency agreement before 1 January 2016 that is still operating, then the agent:
- does not have to update the estimated selling price for your property in the agency agreement
The agent must still comply with all the other new obligations for not advertising or making statements about the likely selling price of the property that is less than their estimated selling price contained in the agency agreement – for more details refer to our underquoting page for agents.
Underquoting questions and answers for sellers
Can the agent promote my property with 'offers above' a certain amount?
No, this is against the law. Statements such as ‘offers above’ and ‘offers over’ and using symbols like ‘+’ are misleading.
If you and your agent agree, you can decide not to make any statement about the likely selling price and not publish any price estimates. If so, prospective buyers will need to rely on other means to help inform them about the value of your property in the current market.
What evidence should the agent give me on their estimated selling price?
An estimated selling price must be reasonable and based on the factors likely to impact on the sale price. Examples include comparable sales, location, architectural design, future use of the property such as zoning or rights of way, market demand, and seasonal and economic factors.
The agent must always provide you with evidence for their selling price estimate for your property. They also need to give you written notice if they revise their estimate, provide you with evidence of the reasonableness of the revision and amend the agency agreement to include their revised figure. They do not need your consent to amend the agency agreement with their revised estimate.
Does the agent need my consent before changing the estimated selling price?
No. Under the laws, an agent must comply with the requirement to revise their estimated selling price if they receive evidence, such as market feedback, that changes their professional assessment of what your property is likely to sell for.
They must advise you in writing that they have revised their estimate, provide you with evidence of the reasonableness of the revision and amend the agency agreement by including the revised estimated selling price.
What if the agent revises their estimate but the local newspaper has already gone to print?
The agent must be able to demonstrate that they have made reasonable attempts to update any marketing material that no longer shows their reasonable estimated selling price.
Why is a price estimate that is given as a range limited to 10%?
It is expected that a professional, experienced agent would be able to approximate a property's price within a 10 percent range. For the estimated selling price of a property to give any meaningful information to consumers, it needs to be within certain limits. A range of between $500,000 and $900,000, for example, would be too wide for most consumers to assess whether the property is affordable to them.
While agents cannot be expected to predict exact sale prices, their profession is responsible for making informed assessments about a property's likely selling price.
Will agents have to tell buyers their estimated selling price?
The agent is not required to disclose the estimated selling price to potential buyers, whether in advertising, in writing or verbally. This situation could arise if you instruct the agent not to reveal the estimated selling price.
The agent must disclose their estimated selling price in the agency agreement, and notify you if it changes. They must provide evidence for their initial assessment of the selling price and update you with any future evidence if they revise their estimate.
If a property is advertised with a price, the advertised price cannot be less than the estimated selling price in the agency agreement. If you have an open house and the agent provides information regarding the price, again it cannot be less than the estimated selling price in the agency agreement.
What if I get different estimated selling prices from different agents?
If you are comparing agents, it is possible to get some variation in different agents' estimated selling prices, however all agents should be relying on the similar evidence to formulate that estimate.
Sellers should be wary of choosing an agent just because their estimated selling price for the property was considerably higher than other estimates provided by competitors. This could indicate that the agent doesn’t understand the market and that the estimate is not reasonable.
All agents must provide evidence that their estimate is reasonable and Fair Trading inspectors can demand that evidence. If it is found that the estimate isn’t reasonable, based on the evidence, the agent is guilty of an offence.
What happens if the current property market changes?
Market demand is just one factor agents need to take into account when determining the estimated selling price for property they are marketing. If there is a change then the agent will need to also look at any other evidence of the likely selling price of the property to decide whether they need to revise their estimated selling price. If they do revise their estimated selling price, they need to:
- advise the seller in writing and provide the evidence for making the revision
- amend the agency agreement with the revised estimated selling price.
- take all reasonable steps as soon as is practical to update any marketing of the property with the revised estimated selling price.
Does underquoting laws stop the market from functioning competitively?
No. The underquoting laws are designed to ensure that buyers receive more accurate information. This should maintain competition between buyers who can afford the property, but stop misleading potential buyers into believing that a property is in their price range because an agent has underquoted their estimated selling price.