Fair Trading losing the war
By Bailey Compton 27 Oct 2023
Good law. Poor policing.
In spite of their efforts, Fair Trading are losing the war against underquoting.
Although there are laws prohibiting an agent from overestimating a price to a vendor and underquoting a purchaser, this practice of underquoting is still rife across Sydney.
We, ourselves, are currently involved with a sale of a property in the inner city.
We were advised by an Agent that, although the price was worth X, we should put on the Agency Agreement Y. The reason for this was that, they needed to advertise it at a price below the market value. This was for the purpose of attracting potential buyers as a means of creating competition in the auction.
We advised them that this was illegal under section 72A(1) of the Property and Stock Agents Act 2002. The Agent said bleakly, “We know. But we have no choice. The other agents are doing it and we cannot compete. If we continue to advertise at a market price, we won’t even get lookers”.
This is a timely reminder that, cheats do prosper, even in a regulated marketplace.
In the current market, if an Agent decides to comply with the rules, they will not be able to effectively represent their client. Since everyone else are advertising low, you end up doing the same, just to ensure your open houses are filled with potential buyers. Ultimately, if one Agent succeeds by lowballing the marketplace, others will follow.
While current laws are perfectly sufficient to protect vendors and purchasers. These laws are only as effective as the policing body. Fair Trading have not yet found a way to effectively police underquoting. As they struggle to police it, the practice continues unabated. Specificity of Laws don’t necessarily change anything! Penalties also do not change anything unless a person has a genuine fear of being caught.
Will the government follow the Victorian model as a means of addressing this problem?
In Victoria, all agents are required to issue a Statement of Information (SOI) in a prescribed form. In essence, the agent needs to use a Fair-Trading form that requires the agent to identify the properties used in their CMA. It probably falls short of forcing the agent to show its workings, but is a documentary start to making agents prove where they are drawing their data.
I dont see the issue of underquoting being an issue. As such Fair Trading should just remove this altogether. With all the information available today re sales etc buyers have plenty of information to research and determine a likely pricing range. If they are too lazy to undertake this research and want to rely on an agent to guide them, then they probably shouldnt be buying a house. People do more research on buying a power drill than buying a house it seems. Also, legislate that to sell all vendors need to provide a pest & build inspection as part of the draft contract thereby taking the cost of this piece of due diligence out of the way.
Dear Bryan,
I see your perspective. Buyers indeed have access to a wealth of information about property prices and sales. It’s essential to recognise that we all have a choice to engage in legal or illegal actions. Letting our conscience guide us is crucial in maintaining ethical practices. Underquoting, in particular, is not only a breach of the law but also contributes to buyers’ distrust of sales agents’ agendas. When agents underquote, they become lawbreakers, eroding trust in the real estate process.
If I understand you correctly, you are advocating for an unregulated marketplace where sales agents are quoting whatever they want, creating a lot of interest from buyers, only to disappoint them. As a result, no one is meant to believe the quoted or advertised price for properties. Additionally, all advertisements may have asterisks to say ‘the advertised price may or may not actually be anywhere near the real sales price.’
It’s crucial to acknowledge the consequences of underquoting. Engaging in such practices not only breaks the law but also undermines the integrity of the entire real estate industry. Upholding ethical standards is essential to ensure transparency and fairness in every transaction.
Thanks for sharing your thoughts on this matter.
Kind regards,
Bailey