In brief - New laws to give real estate agents strong
disincentive to underquote
Real estate agents will be subject to greater penalties,
including forfeiture of commission and any fees from a particular
sale if they are found guilty of underquoting property prices. The
Bill received assent on 23 October 2015.
Hopeful property buyers incur expenses needlessly when real
estate agents underquote
The Minister for Innovation and Better Regulation Victor
Dominello has recently introduced new laws to provide greater
protection to buyers who are purchasing property. The NSW
government had committed to overhauling the current laws to crack
down on an alleged practice of some real estate agents who have
sometimes underquoted to get buyers interested in purchasing
The hopeful buyers would then spend a fortune on building
reports, pest reports, strata inspection reports, finance
applications and legal advice on the draft contract, only to
discover after the actual sale that they were never in the race to
obtain the property.
When the statement "never in the race to obtain the
property" is used, it probably means that the vendor had been
informed (possibly by the same agents) of a far greater estimated
selling price and the eventual reserve sent to the auction greatly
exceeded the underestimated selling price given to the hopeful
New rules to govern how real estate agents estimate and
communicate selling prices
Real estate agents will be required to provide some form of
evidence to corroborate or confirm their estimated selling prices
to the vendor and this estimate will be stated in their agency
agreement to sell the property.
When marketing a property the real estate agent must only use
the estimated selling price provided in the agency agreement with
The estimated selling price can be a single figure or it can be
a price range. When a price range is used, the highest price must
not be more than 10% greater than the lower price, i.e. a price
range could be $1,000,000 to $1,100,000.
The advertisements and representations that say "inviting
offers over" or "inviting offers above" or similar
statements are prohibited from now on.
Real estate agents will be required to keep a register of the
prices that they quote on a property, whether these are provided to
the vendors or to prospective buyers.
Greater penalties for agents found guilty of underquoting
In addition to the existing penalty already in place of $22,000,
real estate agents found guilty of underquoting will now be liable
to forfeiture of the real estate agent's commission and any
fees from the particular sale.
Mr Dominello has said: "There have been no successful
prosecutions relating to underquoting made under the Property
Stock and Business Agents Act in 13 years, so this new reform
is well and truly long overdue."
Agents to be educated about new laws before they take
Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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