It’s now just over three years since the Underquoting reforms were introduced to the property industry in New South Wales, and it still amazes us at the College at how many agents are still confused about the concept. So, this edition of the Chronicle will focus on one of the points on which we receive constant questions, and that is when you as an agent have a different opinion of price from your vendor.
This question is “Can you advertise a property for less than your Opinion of Price, if the vendor instructs you to do so?”
No, you can’t.
So the general scenario is – if I as an agent have appraised a property at a price of $800,000, however my vendor has instructed me to market the property at $750,000 or that they are in a rush to sell and will accept or want less than I have appraised it for, is my agency at risk of breaching the underquoting rules within the Property, Stock and Business Agents Act?
The short answer is yes and unfortunately the fines can extend well beyond the $22,000 that NSW Fair Trading can impose should the matter be considered under the Federal Legislation.
The agent’s role within the appraisal process is to provide the vendor with their estimate of the property’s selling price, informed by comparable sales data for the geographic location.
While it will always be the vendor who decides what price they are willing to accept for their property, the agent is restricted in their advertising, which includes advertising materials presented online, in brochures and print media as well as the advertising being done when the agent discusses the property with any potential buyers, to only being able to discuss figures starting from the appraisal price and going up in a 10% range, not going below that appraisal number.
Specifically, the Act states the following:
73 Underquoting in Advertisements for residential property
A real estate agent must not publish or cause to be published an advertisement in relation to the sale of a residential property that indicates or suggests a selling price for the property that is less than the estimated selling price for the property.
Maximum penalty: 200 penalty units.
73A Underquoting in representations by real estate agents
A real estate agent or any person engaged by a real estate agent must not, in the course of marketing a residential property, make any statement to any person that indicates or suggests that the property may be sold for a price that is less than the estimated selling price for the property.
(1A) A real estate agent must ensure that any person engaged by the real estate agent does not, in the course of marketing a residential property, make any statement to any person that indicates or suggests that the property may be sold for a price that is less than the estimated selling price for the property.
Even when instructed by the vendor, the agent cannot suggest to a purchaser that the vendor will, or may, take an amount for the property underneath the bottom figure in the appraisal conducted by the agent and represented in the agency agreement with the vendor.
So, in relation to the example above, you have appraised the property at $800,000, and as the vendor has informed you that they require a quick sale and are willing to accept less – it would be prudent to offer the property with no price in the advertising and when speaking price, use phrases such as “my opinion of this property in relation to comparable properties is $800,000 – but I can inform you that we have a very motivated vendor”. This makes it clear to any prospective purchaser that if they were to make an offer less than the $800,000 that it would most likely be considered in a favourable manner.
There is a valuable lesson agents should take from this section of the Property, Stock and Business Agents Act and that is to have clear and frank discussions about expectations and about the limits your agency has in place because of the legislation.