The NSW Government is introducing reforms that address underquoting in the NSW property market and provide clarity for buyers, agents and vendors. The reforms are designed to prevent properties being underquoted – that is, marketed at a price less than the agent’s true estimate of the selling price. The proposed laws would also enable effective enforcement. By setting clear requirements for agents to understand and adhere to, agents will be able to be audited against the new requirements and prosecuted if they breach them.
The reforms are before the NSW Parliament and are expected to commence in early 2016. The proposed underquoting reforms will ensure any estimated price communicated to vendors and prospective buyers represents what an agent actually expects a property to sell for.
Under the proposed reforms, an agent must…
- include their true estimate of a property’s likely selling price in the agency agreement (also called the sales agreement).
- record the evidence that informed this estimate and provide it to the vendorin writing.
- ensure a price range is no greater than 10% of the bottom figure (eg. $500,000-$550,000).
- record all price estimates (quotes) provided while a property is marketed.
- ensure their price estimate remains realistic by updating it and advising the vendor in a timely manner if they are aware – or should reasonably be aware – of evidence or circumstances that changes it. The agent must advise the vendor of their revised selling price estimate and the evidence on which it is based in writing (eg. email) and amend the agency agreement. They must also update, as soon as feasible or practical, any marketing of the property that reflected the old estimate with the new selling price estimate.
Agents will not be able to…
- provide any price estimate less than what they have assessed a property is worth (as recorded in their agency agreement with the vendor). This applies whether the agent is advertising the property or in any communication with prospective buyers about the property’s likely selling price.
- advertise vague price information, including any statements such as “offers above” or “offers over” an amount, or “plus” a particular price (eg. $500,000+), which could misrepresent or obscure a property’s estimated value. Also, an agent must never indicate a selling price estimate that does not match the agent’s true estimate.
The reforms will introduce stronger penalties to deter underquoting. This includes fining agents up to $22,000 if they breach the new requirements. Agents could also have to forfeit their commission and fees if found guilty of underquoting.