PHOTO: FILE
Underquoting in Sydney Real Estate: A Growing Concern
A newly renovated two-bedroom home in a trendy inner west Sydney suburb was recently listed with a buyer’s guide of $1.5 million, attracting numerous hopeful buyers with budgets under $1.7 million. However, at the auction weeks later, bidding started at $1.8 million and concluded with the Marrickville property selling for over $2.1 million. This is a recent example of underquoting, where a real estate agent provides a buyer’s guide well below their reasonable estimate of the property’s likely selling price. This practice is illegal, and according to new figures from Fair Trading NSW obtained by ABC News, reports of underquoting are on the rise. Yet, those in the housing market believe the number of official complaints does not reflect the scale of the problem. Many don’t even realize it’s illegal, and those who do often don’t bother to complain due to inadequate consequences.
Underquoting Complaints on the Rise in NSW
So far in 2024, there have been over 100 complaints of underquoting in NSW. The government acknowledges the issue and plans to crack down on repeat offenders. NSW Fair Trading received 168 complaints of underquoting in 2023, and since January this year, another 105 complaints have been received. The department has already issued 55 fines this year, compared to 54 for the whole of 2023. However, the total value of the fines issued this year is $113,850, which averages about $2,200 per fine. This is a small fraction compared to the average commission earned by a real estate agent from a $2 million property sale, which is usually more than $40,000.
Widespread Frustration Among Buyers
Stephene Bolder and her husband have been searching for a new house in Sydney’s south-eastern suburbs since January and have experienced underquoting on “at least 20 properties.” Bolder said, “Every time we inquire about a property, we expect at minimum the property to sell for at least $200,000 to $300,000 more than what they’ve guided. It’s incredibly stressful and disheartening. We’re spending thousands of dollars for no reason on conveyancers.” Despite knowing the practice is illegal, they haven’t lodged a complaint, believing nothing will change.
Calls for a Royal Commission
Sydney buyer’s agent Paul Mulligan experiences underquoting “every day” and never relies on an agent’s buyer’s guide. Mulligan said, “It costs buyers money, time, and causes enormous distress over properties they were never in the running for.” He called on the government to put more resources into fair trading to bolster their investigators. “You can change as many laws as you like, but until you have the resources to enforce them, nothing will change. We need a royal commission into the whole industry,” he said. NSW Strata and Property Services Commissioner John Minns acknowledged underquoting was “happening more often than the complaints we’re receiving.” The NSW government is establishing a task force within Fair Trading NSW to crack down on property sector offenses, including underquoting.
Insufficient Penalties for Underquoting
In Victoria, the state government launched a task force in 2022 to stamp out underquoting, issuing over $1 million in fines. Minns acknowledged fines for underquoting were often “inadequate” and said the department would consider harsher penalties for repeat offenders. “If the compliance inspectors can only impose a $2,200 fine and the agent feels that’s just the cost of doing business, that’s not going to change behavior,” he said.
Real Estate Industry’s Perspective
Real Estate Institute NSW Chief Executive Tim McKibbin believes most agents are not deliberately underquoting but acknowledges it is common in a rising market. “The agent also has an obligation to keep the price guide correct as the market changes,” McKibbin said. “If we started at $1 million and the market was moving up, they should be assessing where the market is and giving feedback to prospective purchasers.”
SOURCE: ABC