UPDATE: Agents Underquoting Act
The recent boom of the Sydney Property market has caused the State Government to take action.
The penalty for a Real Estate Agent to underquote a property is a fine of up to $22,000.00, however in the past thirteen years, not one case of underquoting lead to a conviction.
On 22 October the Bill for the Property, Stock and Business Agents Amendment (Underquoting Prohibition) Bill 2015 was assented after it passed both houses. It will come into effect early in the new year.
The aim is to eradicate underquoting by imposing tougher penalties on agents and limiting the use of certain words or phrases in their advertising.
The Bill imposes the following:
1. A prohibition on advertising including the words “offers above” or “offers over” or similar;
The Act gives a guide as to what is not acceptable and should be avoided at all costs. But what words will be used in their place? Will Real Estate advertising become so ambiguous the purchasers will be confused?
Recently the Legal Profession Uniform Laws came into effect, abolishing the restrictions on using certain words in legal practitioners advertising for Personal Injury Law matters. For years the big firms have taken a gamble, opting play on words and to pay any fines imposed to get the work through the door.
2. A requirement that the estimated selling price be included in the agency agreement;
If the price you enter on the agency agreement is a single figure, for example $500,000, then that’s simple enough – the estimated selling price is $500,000. So in your advertising and communications with prospective purchasers you can’t quote a price that is any lower than $500,000. Simple!
However, if you enter a price range on the agency agreement, it is only permissible for the range to be 10%. Section 72A(2) of the Bill says :
“A real estate agent’s estimate of the likely selling price of a property may be expressed as a price range, but only if the highest price in the price range exceeds the lowest price by not more than 10 per cent of the lowest price.”
3. An obligation for Agents to keep (for at least three (3) years) a record of each estimated price quoted to a prospective buyer;
Section 73B(1) of Bill states:
“A real estate agent who makes a statement in the course of marketing a residential property to a buyer, prospective buyer, seller or prospective seller that the property is likely to be sold for a specified price or within a price range, must make a written record of the statement …”
Section 73B(2)(a) of the Bill goes on to specify that the record of the statement must:
“contain the address of the property concerned, the price or price range, the date and time of the representation and any other information that is prescribed by the regulation …”
So estate agents will now require meticulous record keeping of every text, email and telephone conversation they have with every potential purchaser.
4. In addition to any penalty imposed, a Court may order Agents to forfeit whole or part of their sale commission where breach has occurred to the compensation fund. .
This money will be paid into the Property Services Compensation Fund managed by Fair Trading.
The compensation fund was established to help people who find themselves out of pocket as result of their dealings with an agent and other licensees under the Property, Stock and Business Agents Act.
Fair Trading will also establish an underquoting hotline so that members of the public can make complaints and provide “tip-offs” for Fair Trading to investigate.
Potential purchasers can outlay hundreds to thousands of dollars in obtaining pre-purchase reports, such as Pest, Building, Strata or Building defects.
Real Estate Institute of New South Wales president Malcolm Gunning said the reforms were welcomed by the industry.
“The reforms bring clarity and surety to the real estate industry. We support this legislation that will require agents to be much more accountable in the determination of current market value and provides transparency to those seeking to make a purchase,” Gunning said.
“These reforms are a step forward for the real estate industry and are in line with our goal of stamping out poor agency practice,” he said.
If you are looking to purchase a property please contact KREISSON to discuss the process.