Wats happening with... Selling Property and Underquoting in real
Property prices are rising and there are a lot of people looking
to buy. In this market auctions are common and sometimes there may
be differing opinions with real estate agents as to the value of
properties. The law has caught up with some real estate agents who
underquote property values to foster interest in properties. To
those unfamiliar with the marketing tactics associated with selling
property, underquoting is the term given to the illegal process of
advertising property, or representing property to potential buyers,
at a value that is less than what a vendor is willing to sell their
property for, or less than the reserve price at an auction.
Underquoting has assisted real estate agents in raising interest
in properties through using comparatively low prices, when in
reality there is no intention for a property to be sold at that
price. Whilst some real estate agents have been able to get away
with these practices in the past, simply because underquoting has
been so difficult to prove, the Federal Court has recently shown
that there will be consequences if agents act deceptively in the
sale of residential property in the case of Director of Consumer
Affairs Victoria v Hocking Stuart (Richmond) Pty Ltd  FCA
This case has provided a clear example of the penalties that the
Courts will impose in circumstances where it can be shown that
underquoting has occurred. The defendant company was found to have
made false and misleading representations in relation to 11
advertised properties. Hocking Stuart admitted to each of the
allegations and the following orders were made against them:
The business had to display a notice within their office
regarding their recent conduct,
visible to customers, for a period of 6 months;
The business had to publish an excerpt in the popular newspaper
outlining their actions and the orders made against them;
The business employees and owners had to undertake a compliance
at education and compliance with, all its legal
The business paid $80,000 to $90,000 in legal costs; and
The business paid a fine of $330,000.
It should be noted that the maximum pecuniary penalty in
Victoria for each contravention is $1.1 million; however, the
courtconsidered $30,000 to be appropriate in these circumstances.
This case, together with 13 more investigations currently taking
place, not only exemplifies the harsh consequences of the practice
of underquoting, but should also act as a warning to real estate
agents across Australia: consumer legislation will be strictly
enforced and there is no place for underquoting in the Australian
Real Estate market. In NSW, the Property Stock and Business Agents
Act 2002 is the primary piece of legislation relating to
underquoting. In a nutshell, sections 72A and 73 of the Act state
that (amongst other things) agents must do the following:
Provide a reasonable estimate of the property's selling
price in the agency/salesagreement and provide the vendor with
evidence of how this estimate was reached;
If providing a price range, ensure that the higher price is not
more than 10% above
the lower price;
Refrain from using phrases such as "offers above" and
"offers over" or similar; and
If the estimated price changes and is no longer reasonable,
take all steps to ensureall parties, including the vendor and those
listed in the agency agreement, are aware of the new price, as well
as update any advertising of the property with the new price.
Compliance with these requirements is difficult with rising
property prices and also with unique properties. The Australian
Consumer Law also regulates acts of misleading and deceptive
conduct in relation to cases of underquoting.
If you have questions about how to ensure you comply with these
laws, or have questions about underquoting, pleasec ontact our
Property Law Team for further advice on 9521 6000 or
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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