One state is cracking down on underquoting after instances where properties sold for more than twice the amount of their original price guide.
NSW real estate agents and companies have been fined a whopping $250,000 for underquoting during property transactions.
And they’re staring down the barrel of more penalties in what is a major crackdown for the industry.
Several days ago, NSW Minister for Fair Trading Eleni Petinos announced that she was taking a long hard look into property price guides and that underquoting was not acceptable.
“Understating the expected price of a property for sale by providing false estimated selling prices of the property completely wastes the time and money of potential homebuyers,” Ms Petinos said.
“Underquoting will simply not be tolerated. We will continue to investigate and penalise where false prices are provided to consumers.”
A special NSW Fair Trading task-force has issued 114 infringement notices over the last year totaling a quarter of a million dollars. The bulk of that — $200,000 worth — occurred in the past nine months.
And in a first for the state, harsh restrictions will be placed on “serial underquoters”.
It comes off the back of an unprecedented year for the property market, where homes surged by 25 per cent in 12 months in what hasn’t been since the mid-1980s housing boom.
Complaints about underquoting jumped significantly last year, with 329 reported in 2021 and just 97 recorded the year before.
Of those 329 complaints to NSW Fair Trading, more than half were found to have serious weight to them.
The agency found that 211 of the complaints described conduct that was a breach of the Property and Stock Agents Act 2002.
In fact, eight matters have been referred for a formal investigation to take place.
Ms Petinos is demanding change in the industry and that will start with serial offenders.
Repeated breaches by property agents will require at least two licensed agents, or one licensed agent and a certificate holder, to sign off on their comparable pricing for every new property listed for sale.
It is unclear how many breaches would render someone a repeat offender.
The announcement is timely.
Just last weekend, news.com.au reported on Sydney homes selling by as much as $700,000 over their price guide at auction.
A semi-detached house in Bondi hit the market last month. the 508 square-metre house, which has three bedrooms and one bathroom, set the reserve price at $4.95 million.
Against the backdrop of the NSW capital’s turbocharged real estate industry, the property eventually sold for $5.65 million. That’s an eye-watering $700,000 above.
In an even more extreme example, an inner west Strathfield home sold for an eye-watering $1.25 million over its reserve price.
Bidders pushed up the price for the four-bedder Strathfield dwelling from $2.3 million to $3.55 million.
A disappointed journalist took to Twitter after a one-bedroom apartment she had attended at auction sold for $700,000 more than the price guideline.
Tamsin Rose, from The Guardian, tweeted: “At a 1 bedroom apartment auction in Birchgrove. It was listed for $800,000. It just sold for $1,532m.”
The frustrated auction attendee added: “Sucky underquoting, waste of time for many.
“First listed at $750,000 on February 4. So it sold for more than double initial guide.”
Property Services Commissioner John Minns condemned the practice of underquoting.
“Covid has not affected the property market, in fact the real estate industry has encountered record sale and income during Covid. Agents successfully worked within the requirements and have managed to achieve record sales,” he said.
“Underquoting is not just a breach of the Property and Stock Agents Act, it is unprofessional and costs consumers time and money. All stakeholders agree an industry and regulator collaboration can achieve much to educate, communicate and enforce increased standards.
“We are forming a roundtable to identify how we can improve outcomes for buyers and industry and this will include representatives from Fair Trading, the NSW Real Estate industry and buyers’ advocates.”
Agents suspected of underquoting should be reported by calling NSW Fair Trading on 13 32 20.