What to do if a real estate agent is underquoting? By Alison Barrett and Jillian Barrett – Sisters In Law
A NSW man put in a bid for a property but was told the owners were “holding out for more” with claims they had already got an offer $80,000 over the price guide.
Question:
I’m currently trying to buy a home in Sydney and I’m coming up against a world of problems. Not only is the market ridiculously hot but I feel like I can’t trust real estate agents. The area I’m searching in has gone up by over 20 per cent in less than a year yet the agents always seem to want more. I put in a bid on a place with a guide of $800,000 but the agent said they’d already been offered $880,000 but were “holding out for more.” He said if I offered $900,000 it would be mine. What proof do agents need to have to show an offer has been made? How do I know the $880,000 really exists? – Dan, NSW
Answer:
Having a level of scepticism of real estate agents and sellers is very healthy and stands you in good stead to ensure you are not being taken for a ride.
Your question raises two really important issues: underquoting when it comes to the price guide, and the handling of multiple offers being made by potential buyers.
In relation to underquoting, there are laws in NSW intended to stop real estate agents from understating property prices in their listings.
The price guide of $800,000 quoted by the real estate agent can’t be merely plucked from the air or set at a price that makes the property attractive to more buyers.
An estimated selling price needs to be in the agreement between the agent and the seller when the property is listed.
This estimated selling price needs to be a ‘reasonable’ estimate based on the agent’s careful consideration of the property’s individual features, market conditions, comparable sales and their own professional skills and experience.
The agent needs to keep records of all the unique factors they consider in determining the estimated selling price, and provide these to the seller.
NSW Fair Trading is alive to the practice of underquoting and will act against dodgy real estate agents.
If you suspect an agent has underquoted a listing price you can make a complaint to Fair Trading and they will determine if the agent has complied with the law.
Breaches of the law can lead to agents being fined up to $22,000 and the loss of commissions earned from the sale.
Despite this, underquoting can be really tricky to prove, especially in the current economic climate where the property market is booming and property is selling quickly.
The second issue that you raise relates to multiple offers and playing potential buyers off against one another.
Agents have a statutory obligation to get the highest possible price for the seller (who is their client) and to achieve this, it can mean telling potential buyers about all offers.
This practice is legal in NSW.
However, the Australian Consumer Law makes it unlawful for real estate agents to behave in a misleading or deceptive way, which includes telling buyers there are competing offers when there are not, or increasing the value of competing offers.
There is unfortunately no way for you to know if the agent is being truthful with you.
If you suspect they are being deceitful, you can call Fair Trading for more information and consider lodging a complaint as there are heavy penalties for this conduct.
You should also be aware that until you exchange written contracts with the seller, they can continue to negotiate with other buyers, even if there has been a verbal agreement.
Best of luck with your search!
This legal information is general in nature and should not be regarded as specific legal advice or relied upon. Persons requiring particular legal advice should consult a solicitor.