Everyone knows that the property market has changed in the last 12 months and is now well away from the heights of 2015/16. It was something that we all knew would happen, because those prices just weren’t sustainable. Throw in a Royal Commission into the banking sector and changes to overseas investment, well, the bubble just had to burst at some point.
Whilst property prices were on a fast upswing in 2015, the Office of Fair Trading looked into the practice of Agents underquoting. In fact, what was really happening at that time was that most Agents were quoting fairly realistic price guides, but with the money on tap from banks, buyers were simply overpaying and properties were selling sometimes hundreds of thousands of dollars over their estimated guides to everyone’s surprise. In any case, underquoting reforms were passed and came into effect on January 1, 2016 (so they are not new).
Now that the market has fallen and buyers are harder to find due to finance restrictions, some Agents have adopted true underquoting practices, where they deliberately quote much lower than the Vendors expectations, in order to “get people in”. As opposed to the natural competition between buyers that we saw in 2015/16, Agents are now trying to create the competition, and one way to do it is to underquote the price, and that’s just bull!
Unfortunately underquoting can have a very negative effect on the market in many ways:
- The price the Vendor truly wants may not be reached, as the Buyer has been told to expect to pay much less
- Underquoting can affect other sellers in the market, because buyers will assume an Agent is underquoting even if they are quoting accurately
- Underquoting leads to mistrust from both buyers and sellers in real estate agents and the sales process
- Underquoting has a negative effect on the market and drags prices down
If you are buying and feel that an Agent is underquoting there are things you can do:
- Ask to see the Agency Agreement that the Agent has signed with the Vendor
- Ask the Agent to provide you with a list of recent comparable sales
- Contact the Office of Fair Trading (complaints), you can lodge a complaint easily online
If you are a Seller, you need to:
- Agree on a price that you are willing to accept with your Agent and be aware that your Agent must quote that price, or a price range (the range must be not greater than 10%)
- You need to be aware of the laws, and if you feel your Agent wants to implement an underquoting strategy, choose a different Agent!
- Be prepared for your property to take longer to sell if needed. If your Agent quotes accurately, at least you will know if the market will meet your expectations or if you need to adjust, or hold out longer to achieve the price you want
For more information on underquoting in NSW, check out the links here for Agents, Sellers and Buyers: