Underquoting rife as dodgy real estate agents break buyer trust

NSW Fair Trading has failed to crack down on dodgy real estate agents, having never once handed down the maximum penalty for underquoting.

NSW Fair Trading last May established a dedicated underquoting team to address “rising concerns” about the practice.

Underquoting by real estate agents is becoming more frequent across Australia as a lack of regulation and weak enforcement frustrates those in the property market and forces up prices, according to industry figures.

NSW Fair Trading has never handed down the maximum penalty for underquoting by real estate agents, despite the practice being pervasive across Sydney and leaving aspiring first homebuyers with wasted time and money.

NSW Fair Trading last May ­established a dedicated underquoting team to address “rising concerns” about the practice.

Data from the regulator’s June underquoting compliance program showed there were 28 fines issued of the 50 estate agents found to have underquoted their prospective clients. Those fines ­totalled $52,800, averaging $1056 per agent found to be non-compliant, and $1885 per agent fined. None had their commission revoked.

Other disciplinary actions were verbal or written warnings. The 50 cases of underquoting were found from 87 inspections, with most inspected prior offenders.

Real estate agents underquote prospective buyers when they set unrealistically low price guides relative to equivalent sales prices. It allows them to use house hunters with insufficient budgets as window dressing, creating an artificial urgency among those with a chance at affording the true price in the process.

Underquoting is notoriously hard to identify and prosecute in rising or competitive markets, but buyers agents, who assist prospective homeowners in finding suitable properties, see it happening more frequently.

Buyer’s Agent Association of Australia president Rich Harvey manages agencies in Sydney, Brisbane and Melbourne, and had seen underquoting across the competitive city housing markets.

“There’s an old saying: quote it low and watch it go,” he said. “In a perverse way it’s good for buyers’ agents, because we get to sort out a mess and give honest and open ­advice to the client for a profit.”

Buyer’s Agent Association of Australia president Rich Harvey.

Fines for agents are topped at $22,000 for those found to have knowingly underquoted, but most penalties sit closer to $2200 if enforced ­beyond a warning.

“The $22,000 is absolutely a paltry fee. It’s just ridiculous in the scheme of things,” Mr Harvey said. “I think it’s just a woefully inadequate deterrent.

“There’s a lack of willingness on the part of Fair Trading compliance officers to really investigate these claims.”

Real Estate Buyers Agents ­Association NSW representative Linda Johnson said underquoting was likely to drive up the price of pre-emptive fees such as conveyancing if Fair Trading didn’t better regulate.

Other affected fees include building permission planning and application costs, consultations with lawyers and renovation quotes from builders.

Veteran Newcastle buyers’ agent and Property Solutions 101 director Kylie Frearson said the lack of enforcement was encouraging more agents to mislead customers.

“If the general public saw fines or punishments enforced, they would probably be more inclined to report,” she said.

“First home buyers need to start doing more due diligence, and that way you can navigate around that underquoting, because you’re educating yourself. Knowledge is power.”