New property laws for a New Year! Real estate agents who underquote are the target
If you’re a buyer in the market for property, changes to the law could mean a happier new year ahead in 2016.
In NSW, on 1 January 2016, the provisions of the Property, Stock and Business Agents Amendment (Underquoting Prohibition) Act 2015, No 31 came into effect.
The amendment intends to prevent selling agents from underquoting the estimated selling price of a property during the property marketing campaign.
This is another boost to consumer protection laws, another layer of support for property buyers in NSW (see here).
Underquoting has become an unflavoured practice, presumably adopted to attract interest in the property, which is similar in effect to “bait and switch” advertising.
Buying a home is the biggest financial investment that many people will make in their lifetime. When a property is advertised as being within a particular price range, and that price range falls within the budget of potential buyers, the potential buyers can spend significant amounts of time and money attending property inspections, undertaking pest and building reports and engaging lawyers to review the sale contract – only to find that the property sells for an amount substantially more than that quoted by the selling agent during the marketing campaign.
Complaints relating to underquoting have spiked in recent times, no doubt buoyed by the hot property market in NSW. The Department of Fair Trading has noted the previous arrangements with respect to underquoting by selling agents made it difficult to effectively enforce the laws and penalise agents who engage in underquoting, and that clearer requirements for selling agents would better protect consumers in the NSW property market.
The new amendment introduces tougher requirements relating to:
price estimates contained in agency agreements between a seller and the selling agent;
underquoting in advertising (ie, in marketing material);
underquoting in representations (ie, when communicating with a potential buyer); and
record keeping requirements of quotes made by a selling agent.