- 19 Sep 2022
- By API Magazine
Underquoting remains a major issue in the real estate industry, prompting the Victorian Government to launch a dedicated taskforce, while other states have issued relatively few, if any, infringements for the widespread practice.
The scourge of illegal underquoting continues to waste the time and money of property buyers and the varying levels of action – or inaction – by the states suggests the problem will not be eradicated soon.
An agent is underquoting the selling price of a residential property if they make a statement or publish an advertisement about its price that is less than their reasonable estimate of the property’s likely selling price.
Underquoting laws are designed to ensure that buyers don’t waste money and time on property inspections, getting reports and attending auctions for properties that will likely be out of their price range.
Media reports have suggested that up to 80 per cent of properties were estimated to be underquoted in Victoria and industry professionals have told API Magazine that the situation is no better in New South Wales or Queensland.
Despite these claims, the number of infringements being issued against perpetrators is relatively low in all states, while there were none issued in Queensland this year.
Allen Habbouchi, Head of Project Sales and Distribution, aussieproperty.com, said underquoting gives buyers false hope.
“Underquoting may actually deter buyers from entering the market at all, as they start to lose confidence and hope with the whole experience,” he said.
Mr Habbouchi said properties in Sydney were routinely underquoted and estimated it would rival the 80 per cent of properties advertised, as claimed with Victoria.
Deterrent value
Consumer Affairs Victoria (CAV) recorded 1,466 underquoting inquiries and complaints in the state from 1 July 2021 to 31 July 2022, with just 48 infringements and 171 official warnings eventuating. This compared to 977 contacts in 2019-20, and 1,218 in 2018-19.
NSW Fair Trading issued 161 penalty infringement notices for underquoting and related offences. Each case was fined $2,200. Agents in Sydney usually charge a commission of about 2 per cent on sales, meaning the revenue on a median house price in the city of $1.6m would be about $32,000.
Mr Habbouchi said the fines and current laws were not serving as a deterrent.
“Agents purposely underquote in order to get the numbers for auction but RP Data and CoreLogic also have a lot to answer for, as their valuation price guide varies between 20-30 per cent in some instances, which does not help consumers at all.”
Queensland’s Office of Fair Trading (OFT) said it monitors the marketplace and conducts targeted proactive compliance checks throughout the year.
“No trends or concerns in relation to underquoting have been identified and there have been no infringement notices issued for underquoting in Queensland this year.
“The OFT has received nine complaints this year from consumers raising matters associated with property pricing, including concerns about properties being marketed without a price, and where the initially listed sale price was later increased, however, the OFT is not aware of any consumers being financially impacted in relation to these.”
Melinda Jennison, Buyers Agent, Streamline Property Buyers, said in Brisbane, unlike Sydney and Melbourne, quote ranges are not provided to buyers prior to auction so there is rarely a price guide provided leading up to an auction.
“For private treaty sales, a lot of properties in Brisbane are still being listed without a price,” she said.
“Where buyers can be misled is when a property has been filtered at the back end of real estate portals with a price range that is well below the anticipated sale price.
“The result is that when buyers are searching up to a maximum prescribed value, properties that are well above that range are still appearing in the search feed for buyers and this is extremely misleading, but agents do it to attract more buyer interest.”
Timely taskforce
In Victoria, CAV has this week launched a $3.8 million taskforce to target unfair practices in the property market, including underquoting.
It will include existing and additional officers with a range of skills and experience including inspectors, investigators, information analysts, and legal officers.
“The creation of the dedicated underquoting taskforce builds on significant regulatory activity undertaken in May 2021, where inspectors made unannounced visits to 29 metropolitan and regional estate agents’ offices to monitor their compliance with underquoting laws,” a Victorian Government spokesperson said.
Since 2015, Consumer Affairs Victoria has taken court action and accepted enforceable undertakings from 13 real estate agencies, with fines and court costs totalling more than $3 million.
Underquoting was identified as a key concern by the Victorian property market review, the findings of which are currently being considered by Government.
Submissions for the review closed on 1 April. The Victorian Government spokesperson told API Magazine that it was still to be completed.
“The Government is considering the findings of the review alongside changing market conditions and will have more to say about this work soon,” the spokesperson said.
Significant penalties, including fines of more than $36,000, apply for underquoting. Underquoting can also result in penalties under the Australian Consumer Law of up to $10 million for corporations and $500,000 for individuals.
