NSW Fair Trading and the NSW government have recently announced they are looking into the underquoting problem and are committed to finding a solution which ensures purchasers are not misled. Remarkably, NSW Fair Trading has only successfully prosecuted real estate agents twice for this matter since 2004.
What the real estate industry needs is a solution that will benefit all parties including the agent, vendor and buyers. Changing the legislation requiring a property’s reserve price to be set up front for all listings will help eliminate underquoting.
In 2002, dummy bidding was outlawed, which curbed that practice in NSW. The government could potentially achieve a similar result with underquoting if such a legislative change was made.
Auctioning a property is unlike auctioning anything else. Agreeing a reserve price upon listing and before engaging with buyers is the norm when auctioning. In the absence of a reserve price, the auction campaign is considerably more complex and subjective. Real estate agents are bearing the brunt of underquoting dissatisfaction due to their leading role.
In 2004, a real estate agent was convicted for underquoting under the Property, Stock and Business Agents Act and fined $14,000 by NSW Fair Trading. In 2008, another real estate agent was disqualified for five years for the same offence.
Underquoting has been highlighted by the NSW government as a problem and is on their radar to address. The fact that there have only been two convictions since 2004 highlights the difficulty of proving under quoting.
Auctions create market interest, and in many cases large crowds generate an atmosphere of enthusiastic expectation. There needs to be more transparency around the entire process to ensure all parties are fully informed and can make appropriate decisions based on accurate information.