NSW Fair Trading has released new underquoting guidelines to clarify what defines underquoting and how it can be avoided.
“Where a price range is given, NSW Fair Trading considers the lowest price is the agent’s representation to prospective purchasers of a realistic potential selling price,” the guidelines say.
“For example, a range statement of either ‘$500,000-plus’ or ‘offers above $500,000’ will be taken to be a price estimate of equal to or above $500,000.”
The guidelines say that agents are guilty of underquoting and liable for a $22,000 penalty if they give a false oral or written estimate to a buyer or seller.
Agents must satisfy three tests with their estimates: they must believe the quoted price is realistic; they must be able to substantiate it; and it must reflect the expectations of the vendor.
“Having robust records will help agents respond to any request by NSW Fair Trading to substantiate the reasonableness of an estimated selling price,” according to the guidelines.
The regulator also said that the price recorded in an agency agreement will be regarded as the agent’s true estimate, at least initially.
“Agents should keep the vendor informed in writing of any changes in their opinion of the likely selling price of the property,” the guidelines say.
“If an agent or their employee makes a statement in the course of advertising a residential property for sale that is less that the agent’s true estimated selling price as recorded on the agency agreement, an offence may have been committed.”
Fair Trading said agents are “encouraged to be specific” when giving price guides as they “provide strong signals to the market” about likely sale prices.
Agents must also amend their online listings during a campaign if their price estimate changes, according to the guidelines.
David Crombie, chief executive of the Estate Agents Co-operative, welcomed the new guidelines and said they would help agents understand their responsibilities.
“We understand there has been difficulty, especially in the Sydney market, to make accurate estimates on pricing,” he said.
“In light of a volatile market, agents should review their estimates and any marketing to reflect any change to the price estimate as a result of market or vendor feedback.”
Prominent Sydney agency BresicWhitney was charged with underquoting in March, with the case still making its way through the courts.
Meanwhile the NSW government has confirmed it will introduce legislation to parliament to toughen the underquoting regime, after promising in March to “instigate the “biggest crackdown on real estate underquoting in over a decade”.
[Related: Top 100 Agents discuss underquoting]