The surest sign of a property rebound: Underquoting is back

Buyers with little chance of ever acquiring a property are being exploited by real estate agents ‘underquoting’. Now property professionals are speaking out.

Underquoting of property prices is most common in the first-home buyers’ market. Picture: iStock

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Underquoting is back with a vengeance in a rebounding property market, despite a string of recent government initiatives to stamp out the practice.

The scourge of the property market is most prevalent at entry level, the area where price action is currently most intense as first-home buyers move to take advantage of lower rates and incentives.

With auction clearance rates hitting a 12-month peak this week at 74.4 per cent according to the Cotality group, economists have been upgrading forecasts with the price of standalone homes now expected to rise 6 per cent a year in 2025 and in 2026.

Concern over widespread misrepresentation of vendor reserves has prompted SQM research managing director Louis Christopher to call out real estate agents who are underquoting.

SQM Research managing director Louis Christopher.

Christopher says agents are now offering homes in price ranges which “may be deliberately lower than what the seller really wants the property to sell at – the sellers do it to create interest”.

As he explains: “Buyers appear and they find out that the seller had no intention whatsoever of selling within the price range advertised.”

In the two states where prices are showing clear signs of acceleration – NSW and Victoria – consumer agencies within state governments are policing the market. In Victoria, the government launched an underquoting task force to ensure compliance after tracking 4200 complaints.

Buyers advocates – a growing force inside the property market who represent buyers at auctions – are on the front foot too as they try to navigate rapidly changing market sentiment. More than one-third of complaints concerning underquoting are from real estate professionals, according to Consumer Affairs Victoria.

But the deeper issue is widespread casual underquoting where buyers are regularly left in the lurch as prices surge well beyond the top of the advertised range.

Eda Property founder Anissa Cavallo.

Anissa Cavallo of Eda Property Advisory says: “It’s just starting again and I feel very sorry for first-home buyers who are walking into these situations.

“On the other hand, I’d have to say that underquoting is perhaps one of the clearest signals a market is rebounding, it has not been an issue for a while, especially in Victoria.”

Real estate agents defend themselves against charges of underquoting by suggesting that in a rising market, prices can move considerably higher over the short time between listing a property and selling it.

Likewise, professional bodies representing agents point to the relatively low number of identified incidents – The Real Estate Institute of Victoria protested that there had only been 13 incidents of proven legal breaches at the time the state’s taskforce was launched in 2022.

But others suggest that complaints are rarely made by those who lose out, as they are most likely to move onto their next potential purchase without bothering to register a formal objection, despite clear evidence the final price was above the quoted range.

Buyers advocate Jarrod McCabe of Wakelin Property Advisory suggests: “I’d say to people always keep in mind that the agent is acting always on behalf of the seller. It is just as important to look at the prices that are being achieved in the immediate area – you can look at the statement of information on any property to see comparable prices.”

A statement of information on a property for sale should include indicative selling prices of at least three comparable properties in the neighbourhood and the median price for the suburb.