NSW underquoting: Agents issued fines, warnings in real estate compliance crackdown

A crackdown on dodgy NSW real estate practices has resulted in more than 150 agents issued fines or warnings for underquoting as the number of complaints about the practice has soared.

A crackdown on dodgy NSW real estate practices has resulted in more than 150 agents issued fines or warnings for underquoting as the number of complaints about the practice has soared by more than 60 per cent over the last two years.

Figures released by Fair Trading NSW show the watchdog received 168 complaints about agents underquoting in 2023 – a 61.5 per cent increase from 104 complaints in the previous 12 month period.

Since the beginning of 2023, there have been 78 agents fined for underquoting, along with a further 74 issued warnings and 18 agents ordered to undertake education.

Underquoting is illegal in NSW and can involve a property price advertised for less than the agent’s estimated selling price, less than the seller’s asking price or at a figure lower than an already rejected written offer.

The practice is recognised as giving prospective homeowners false hope, only to find out post-auction they were never in with a chance.

Underquoting can give buyers’ false hope.

Fair Trading says underquoting can “wastes buyers’ time and money”.

In NSW, agents found to have breached the law face fines up to $22,000, and in extreme cases can have commission taken from them. Penalty notices of $2200 can also be issued.

Some industry experts have called for underquoting rules to be strengthened including through increased penalties or the establishment of a public “name and shame” register.

Professor Chyi Lin Leem, discipline director of construction management and property at the University of New South Wales, said fines for underquoting can be “minuscule” in terms of commissions agents stand to make on large sales.

Underquoting complaints have increased over the last two years. Photo: generic.

He said some agents are driven to underquoting as a means of attracting as many buyers as possible to auctions, and therefore create competition and increase the sale price.

“Sometimes it can be deliberate as they may want to create a bigger crowd for an inspection and make a property seem popular. It’s a strategy,” he said.

“One of the problems with the current regulatory approach is we don’t see reporting of how many fines are issued and who is fined which could act as a deterrence.”

The crackdown on underquoting includes monitoring auctions. Photo: generic.

The Fair Trading crackdown on the practice included two major compliance blitzes in June and October last year involving more than 200 inspections and 123 agents found to be not compliant with underquoting rules.

A total of 28 agents were fined a combined $52,800 for a range of breaches including underquoting, 34 received penalty notices, 51 agents received warning letters and 34 received verbal warnings and guidance.

Real Estate Institute of NSW chief executive Tim McKibbin noted that underquoting can be difficult to define in the hot Sydney real estate market as properties may legitimately sell over the price guide

REINSW chief executive Tim McKibbin.

“In a rising market and good marketing campaign, a property can exceed the predicted sale price – that’s not underquoting, that’s a good agent doing a great job for their vendor,” he said.

“In 2022, some suburbs saw the median price of dwellings rise by 30 per cent and in a market like that accurately predicting the sale price is very difficult,” he said.

“Nonetheless, one incidence of underquoting is one too many.

Prominent Sydney real estate agent David Walker, director of Ray White Upper North Shore, says the overwhelming majority of agents in NSW do the right thing.

“A lot of buyers have frustrations when things can go above a guide but in a lot of the cases agents have priced it in accordance with comparable sales,” he said.

“With every industry going to be exceptions to the rule and some bad actors but ultimately most are doing the right thing.”

Fair Trading in a statement said it has a number of current “active underquoting investigations underway” relating to underquoting.

To avoid being caught out by the practice, prospective buyers have been encouraged to follow tips such as researching a property’s sale records or attending auctions of similar properties.