Misleading Property Price Guides (NSW)
As the property market has surged in New South Wales, properties are selling at well above their estimated value. This has led many frustrated prospective buyers to accuse real estate agents of publishing misleading property price guides. This article explains the laws that govern real estate advertising in NSW and details consumer protection rules that cover misleading commercial tactics.
Misleading Property Price Guides
In NSW, giving a misleading property price guide is often referred to as price baiting or underquoting. Underquoting is the act of providing a potential buyer with a price range that is under the amount that the seller would be willing to accept. Advertising a property price in this misleading manner is also known as bait advertising.
Bait advertising is a more general term for when a business attracts consumers by offering an item at a low price without making that item available in reasonable quantities for a reasonable period of time. This is prohibited under federal consumer law.
It is important that real estate agents realise that this is not a harmless practice without a victim. When a real estate agent gives a misleading estimate of a selling price, prospective buyers will invest time on research and money on property searches with no reasonable prospect of securing the property. This practice is unfair and the government has made laws to help prevent this from occurring.
In 2016, new underquoting laws were brought in to govern the sale of residential property in NSW. The reforms to the Property Stock and Business Agents Act 2002 are designed to provide clarity for vendors, buyers and real estate agents. Under the updates, an agent cannot give a consumer a vague or understated guide to the price of a property.
Under these amendments, there are also more stringent rules of enforcement, and NSW Fair Trading can require an agent to demonstrate compliance with the new regulations. An agent is obliged to:
- Make a reasonable estimate of the selling price, based on comparable recent sales, property type and location as well as market demand;
- Never advertise or state a price lower than the price given in the agency agreement;
- Present the seller with the evidence used to make the estimate; and
- Update the estimate if they become aware that is no longer reasonable (after notifying the seller in writing and revising the agency agreement). The agent does not need the seller’s consent to make this update to the estimate.
Open-Ended Price And Price Range
When giving a price range, an agent can only quote within 10% of the sale price. For instance, if the price agreed with the owner is $990,000.00, the agent cannot advertise the property for less than $900,000.00 in any advertising. An agent is also not allowed to use vague language when referencing a price guide, such as offers over $900,000, offers above $900,000. or $900,000 plus.
Non-Disclosure of Property Price
An agent in NSW is allowed to omit a price estimate from their advertising content. If the seller asks the agent not to tell buyers an estimated price, the agent is permitted to withhold this information from prospective buyers. When it comes to auctions, the agent may not be willing or able to provide a price guide until just before the auction, as the reserve price may be set on the day of the auction.
Sometimes a property will sell for considerably more than estimated, but the agent has not deliberately underquoted the price guide. As the residential property market is driven by competition, a property can occasionally sell for much more than expected. In any case, an agent must be able to demonstrate that their price estimate was current, reasonable and based on producible evidence at any point in the selling cycle.
Alternatively, a seller might decide that they believe the property can be sold at an amount that is higher than the amount listed on the agency agreement. In that event, the real estate agent can decide to advertise at the seller’s higher price, advertise at the price listed in the agreement or choose not to advertise a price estimate. It is not considered underquoting as long as the agent does not advertise below the price listed in the agency agreement.
Punishments For Misleading Conduct
An agent who violates their obligations under the law and commits an underquoting offence may forfeit their commission and any fees earned from the sale and are subject to a fine up to $22,000.
Real estate agents in New South Wales are obligated to regularly review and update their operational procedures to ensure they are in compliance with the law. Licensees are subject to further underquoting rules contained in the Supervision Guidelines.
If you would like advice about your legal responsibilities as a real estate agent or licensee in NSW, the solicitors at Armstrong Legal can help. Alternatively, if you are a buyer who suspects that you have been underquoted or given a misleading property price guide, we can advise you on the next steps in making a complaint. Please call 1300 038 223 for further assistance with misleading property price guides, a property law issue or any other legal matter.