Underquoting in the spotlight as advertised home prices soar after auctions

Homebuyers are being left disheartened when the properties they bid on at auction are later listed for hundreds of thousands of dollars more. Has this happened to you? Tell us in the comments.

Real estate agents are being accused of blatantly underquoting price guides for homes going to auction — only to hike up asking prices after properties fail to sell under the hammer.

There are now calls for the Minns government to crack down on agents wasting buyers’ time by advertising price guides well below what the owners are willing to sell for.

The housing crisis has fuelled a surge of vendors and real estate agents who post low-ball price guides to get people through the door.

Agents are required to give buyers the same price guidance they have given the vendors.

However, that price guide does not have to be in line with the reserve. That means buyers can be given price guides hundreds of thousands of dollars cheaper than what owners are willing to sell for.

The NSW government has flagged tougher rules could come in to stop underquoting at auctions.

The Minns government is now investigating whether laws need to change to crack down on agents low-balling potential buyers, with Fair Trading Minister Anoulack Chanthivong saying if “rules need to be strengthened we’ll act”.

“It’s disgraceful for hopeful buyers to be taken for a ride while trying to make the biggest financial commitment of their lives,” he said.

“Licensed agents should know the rules and they shouldn’t be looking for loopholes.”

NSW Fair Trading has a program targeting underquoting by real estate agents and says it has issued 39 penalty notices totalling $85,500 in fines this year.

It came as MPs said enforcement should be stepped up to stop the practice.

Granville MP Julia Finn called it “a huge area of concern” and said “we could start with more enforcement”.

“At the moment the market hasn’t returned to pre-Covid levels, yet we’ve seen buyer’s guides which have no reflection on the reserve or (what) the buyers’ expectations are,” she said.

“When it doesn’t meet the reserve and is still listed later way over the buyer’s guide, there’s something wrong.”

A trend of homes later being listed for hundreds of thousands dollars more after being passed in at auction is disheartening prospective buyers. Picture: NCA NewsWire / Dylan Coker

Independent MP Alex Greenwich said Fair Trading should investigate the trend.

“This is a serious concern,” he said. “Underquoting of auction prices sets false expectations and risks attracting people who may bid above their means.”

Rich Harvey, CEO and founder of buyers’ agent group PropertyBuyer.com.au, said the trend was frustrating prospective homebuyers.

He said his buyers’ agents had taken to independently researching the likely price of homes for sale, rather than taking the word of real estate agents.

“There’s enough regulation, but not enough enforcement … there’s a lack of resources to investigate it,” Mr Harvey said.

In one recent example, a house in Lidcombe came with $2.2 million auction guidance.

It was subsequently advertised with $2.65m to $2.75m expectations.

Its listing agent said the property had initially been guided at $2.5m throughout the advertisement campaign after an offer that size had been made, only for the buyer to pull out.

It was then guided at $2.2m based on market feedback before not selling at auction, with the owner then requesting the higher price when it went back on the market for sale, where it remains, according to the agent.

A survey of 85 Sydney auctions last weekend by The Daily Telegraph revealed strong results were occurring under the hammer despite weekly auction offerings hitting 699.

Of the 48 advised sales, half fetched 10 per cent or higher than the guidance.

A quarter fetched 20 per cent above guidance.