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Buyers think underquoting happens regularly, yet even industry experts can’t agree on how common the practice is.

When buyer’s agent Miriam Sandkuhler and real estate franchise Hockingstuart director Rob Elsom were asked about the issue on Monday they could not agree on the frequency of underquoting .

Hocking Stuart director Rob Elsom denied that it is common, instead saying it’s a product of a hot market.

“Underquoting is always a topical issue when there’s a slight rise in the market and that’s what we’re seeing at the moment,” Mr Elsom said.

“You’ll find that a lot of the underquoting is done by just a small minority of real estate agents.”

In fact, he said that agents are often “kept in the dark to a certain extent” awaiting the vendor’s decision about the reserve and that it is this reserve price that is often out of line with expectations.

For this reason, he said there is no real need for a legislative change to stop underquoting.

Ms Sandkuhler said that the problem is continual across Melbourne and cannot be fixed without legislative change.

“For industry associations and agents to continually stand there and say it doesn’t happen is actually quite ludicrous and things need to be brought about to change it and legislation is one of them,” she said.

These are respected industry professionals at the frontline of the market, yet they cannot agree. They are not alone.

In the 2011/2012 financial year, 15 complaints were made and Du Pont Sung International Properties Pty Ltd trading as The Professionals Sunbury was fined.

The issue was so hot at the time that David Lack of Biggin Scott in Port Melbourne drafted an advertisement in the local paper condemning “misleading behaviour by a minority of agents”.

Last year, 400 complaints were made to Consumer Affairs Victoria about underquoting – yet not all of them checked out.

The same arguments have been repeated on both sides. Some say it’s wide-ranging, others say it’s a handful of notorious agents.

Relying on anecdotal evidence on both sides of the fence is a problem.

RealAs targeted Melbourne as the “worst city” for the practice and claimed homes are underquoted regularly by “up to 30 per cent”.

Their data calculates the selling price against the initial quote and does not look at the sales agreement between the agent and the vendor.

The sales agreement is a document signed by both the agent and the vendor that indicates what the property is likely to sell for – it is what a regulator will ask to see should they wish to investigate a complaint.

Consumer Affairs Victoria, who have the authority to ask for access to these documents, last year said there isn’t a problem with underquoting in the state.

“In terms of the technical requirements of the legislation, we would not consider underquoting to be a significant problem in Victoria.”

Victoria’s regulator says there’s no issue, yet Real Estate Institute of NSW president Malcolm Gunning previously told Fairfax Media that Melbourne is “notorious”.

“Setting the lower price rate emanated out of Melbourne and we’ve cottoned on to the idea here in NSW,” Mr Gunning said.

Agents themselves have started to take action, with a handful in Victoria now publishing reserve prices, a step Ms Sandkuhler wants to see made mandatory.

Melbourne may be named the city where underquoting started, but it has no chance of being named the city where it ends. Without any basic level of agreement, changes to legislation are a hard sell.


Posted by Jennifer Duke – The Age on 27th April, 2015