Property Law Update - Underquoting reforms
Important reforms have been made which are relevant for both vendors and purchasers of residential property in NSW.
From 1 January 2016, new underquoting laws apply to the sale of NSW residential property. The reforms, designed to stop real estate agents understating property prices, were made to the Property Stock and Business Agents Act (NSW) 2002 and reflect the expectation that an agent should market property ethically and professionally.
An agent is committing an underquoting offence if they disclose or publish a price for a property that is less than their reasonable estimate of the property’s likely selling price contained in the agency agreement with the Vendor.
Under the reforms, an agent must not give consumers understated or vague property prices and cannot use phrases such as “offers above” when stating or publishing the estimated selling price. The estimated selling price must be represented as either a single price or within a 10% range, such as "$500K-$550K". Essentially, agents must ensure their estimated sale price is reasonable, up-to-date and evidence-based. The agent must further ensure their estimated sale price remains reasonable by revising their estimate based on changing circumstances and factors.
The reforms provide for greater enforcement as agents must be able to demonstrate that they have complied with the new laws upon inspection by a Fair Trading officer. Should an agent be found in breach of the new laws, Fair Trading can issue a penalty infringement notice of $2,200.00. If the matter is prosecuted and an agent is found guilty of underquoting, fines of up to $22,000.00 may be issued. In addition, agents may also lose their commission earned from the sale of an underquoted property; such lost commissions will go towards the Property Services Compensation Fund (supporting consumers who experience loss as a result of property agent misconduct).
Please contact us should you have any queries in relation to the reforms and how they may affect you.