Underquoting occurs in four out of five property sales with agents intentionally misrepresenting prices to attract more bidders, according to a Sydney buyer’s agent.
Yet Patrick Bright from EPS Property Search says the NSW Government still refuses to do anything to fix the “horribly broken” system even as Victoria’s outoging Coalition were moving to propose tough new rules to protect buyers.
In Victoria the Coalition had announced plans, if it won the election, to require agents to advertise the correct price range for a home, including the reserve price, with fines of up to $29,000 for offenders and a hotline for buyers to report alleged dishonesty.
Labor declared those plans an election stunt so the laws are unlikely to proceed with Daniel Andrews now in charge.
“Underquoting here is a huge problem, with some form of underquoting taking place in 80 per cent of sales cases,” said Bright, who has gathered 700 signatures on a petition on change.org for the public to support his stand to force the NSW authorities to stamp out the practice.
“Now the Victorian Government is proposing making agents publish a range of prices they expect, to make sure the system’s transparent and that buyers aren’t wasting time and money on properties they don’t realise they can’t afford. But here, we’re doing nothing.”
NSW Fair Trading Minister Matthew Mason-Cox declined to comment on whether the Government was considering adopting the Victorian proposals, saying simply that the department was keeping a watching brief on the issue.
“NSW Fair Trading is aware of reports of underquoting in the marketplace and is keeping a close eye on the real estate industry, in particular underquoting activity,” he said. “This year, NSW Fair Trading stepped up its real estate compliance checks in the marketplace, undertaking 10 operations across Sydney.
“We will continue to closely monitor the market to ensure that the real estate marketplace in this state remains competitive and fair.”
The department is currently investigating just one city real estate agency for possible underquoting, following its latest compliance blitz, Operation Belaya. That agent, if found guilty of falsely understating the selling price, could face a maximum penalty of a $22,000 fine.
But Bright – the director of EPS Property Search who has purchased more than $500 million of real estate for clients – said that represented merely the average commission on a single sale for an agent. “That’s no disincentive at all,” he said. “It makes it worth running the risk of underquoting.
“The fines are too low, the rules are too relaxed and ambiguous, NSW Fair Trading doesn’t have the resources to properly investigate all the cases where it occurs, and the system is horribly broken. The public is being consistently misled about the reserve prices on property being auctioned.”
But the Real Estate Institute of NSW denies the system here needs fixing. Chief executive Tim McKibbon said it was very hard for agents to correctly predict prices in a strong market, when a good marketing campaign and a vigorous auction can see prices soaring over expectations.
“The real estate agent is obliged to put an estimated price on the agency agreement [between the vendor and the agent] which is very heavily prescribed in legislation,” he said. “So it’s very simple for Fair Trading to discover underquoting issues.
“The reality is that often the price is driven up during the auction and people misunderstand that as underquoting. We have only a small percentage of agents who do the wrong thing.”