New underquoting laws were recently introduced that prevent real estate agents from understating what the selling price of a property is prior to the auction. These new laws have cut underquoting in Sydney by almost half, according to recent data.
The New South Wales office of Fair Trading said that underquoting Sydney property price for a home that is to be auctioned often results in “interested buyers” wasting both time and money “inspecting properties, getting reports and attending auctions based on misleading estimates of the selling price.”
New laws that have been introduced prevent real estate agents from being able to say that a vendor is looking for “offers over” or “greater than $1 million”. In addition, an agent’s price range must be within 10% of the lower and upper value of the quoted price. Advertising must also be kept up-to-date with conversations about price documented.
According to data released on the 1st of March, the proportion of inaccurately quoted property prices fell by a third in February 2016, when compared to last year’s figures. In February 2015, underquoting by an agent was estimated to be at 13.9%, this fell to 9.7% at the same time in 2016.
Industry experts said that this was a promising result that is enabling the Sydney property market to become a fairer playing field. The laws were introduced on January 1st and by the 2nd the Fair Trading office, the regulator of the new laws, had received 76 complaints.
The regulator said that it had conducted 119 “educated activities” after reviewing 5000 real estate advertisements. In addition, Fair Trading had sent out two trader education letters for failure to comply with recommendations to update advertisements.
While underquoting is occurring across Sydney, it seems to be more prominent in Redfern, Newtown, Mosman, Chippendale and Rozelle.
Redfern was deemed as the most inaccurately priced suburb, with agents quoting prices under 17.4% of the final sale price. Newtown was 12% under, and Mossman 10.5%. Chippendale and Rozelle were 9.7% and 8.9% respectively.
According to recent CoreLogic RPData auction rates, Redfern’s auction clearance rate was close to 93%. Of the other suburbs, the North Shore, where Mosman is situated, recorded a clearance rate of 81%. The City and South West, where Chippendale and Newtown are found, recorded a clearance rate of 75.9%, and the Inner West, where Rozelle is located, recorded a clearance rate of 70.8%.
However, while pricing accuracy seems to be improving in Sydney, some agents feel that this is attributed to changes in the law, and other argue that it’s more a case of changing market conditions. Sydney’s overall auction rate, according to CoreLocic RPData has fallen from the high 90s during 2015 to the 70s for the first quarter of 2016. Many say that this is due to a decrease in buyer demand, which has been brought about by an introduction of new lending laws.
Many real estate and industry experts feel that it is too soon to tell if changes to legislation are having the effect that is desired. Others are saying that until agents who are underquoting are caught and fined, then it’s highly unlikely that changes will be witnessed.
Fair Trading has stated that two Sydney real estate agents are currently under investigation after consumer complaints had been received about underquoting. NSW Fair Trading also acknowledged that there was another matter of underquoting “currently before the court” and that a court summons had been issued for the other investigations.
If found guilty of underquoting, the offenders can be fined up to $22,000. Plus, they may be asked to forfeit commissions and fees.
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