Baiting Buyers: The Risks of Underquoting in the ACT
You’d be hard pressed to find a real estate agent who is unfamiliar with the term ‘underquoting’. Indeed the practice of underquoting has become a significant problem in NSW and Victoria, where the average difference between the sale price and the agent’s quote in some suburbs can be as much as 30%. Thankfully, the practice of agents deliberately undervaluing the selling price of a property to ‘bait’ buyers has been relatively infrequent in the ACT, although not without precedent. It is in such a climate of high scrutiny being placed on agents however that you must be aware of the potential penalties of underquoting.
The current law in the ACT
Real estate agents in the ACT who underquote the likely sale price of a residential property face liability under two statutory regimes: the Agents Act 2003 (ACT) and the Australian Consumer Law, found in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Interestingly, these statutory regimes could also apply to an agent over quoting the sale price of a Property.
The Agents Act 2003 makes it an offence for an agent to make a statement about the agent’s business which is false or misleading or to make a dishonest representation (to the Seller or the Buyer) about the agent’s estimate of the selling price of the property. These offences apply to any advertisement published by an agent and cast a wide net in capturing potential dishonest conduct. There are also significant penalties for a breach, being 100 penalty units ($15,000 for an individual or $75,000 for a corporation).
This is supplemented by the misleading and deceptive conduct provisions of the Australian Consumer Law, which make it an offence to engage in misleading and deceptive conduct in the course of trade and commerce (including a specific offence which applies this to conduct in connection with the sale of an interest in land). The potential penalties for being found to have engaged in misleading and deceptive conduct include fines of up to $220,000 for an individual and $1.1 million for a corporation.
In addition to this, agents face a potential disqualification under the Agents Act 2003 should the offence be sufficiently serious.
Cracking down – the response to underquoting in NSW and Victoria
Despite similar penalties being present, in recent years NSW and Victoria have introduced legislative reforms imposing more comprehensive obligations on agents when estimating selling prices and harsher penalties for those who make misrepresentations. Although these types of reforms have not yet been introduced in the ACT, they may be on the agenda of the Legislative Assembly.
In NSW, agents are now required to keep records substantiating selling price estimates and are prohibited from publishing an indication of the sale price less than the estimated selling price for the property (this even extends to advertisements that indicate a sale price of ‘offers above’ or use similar words or symbols). Similar restrictions apply in Victoria, where agents are also required to prepare a statement of information (taking into account at least three properties considered most comparable) available for inspection by prospective buyers.
While the current ACT regime provides for significant penalties should agents be found to have made false or dishonest representations in underquoting the selling price of a property, legislative amendments in other Australia jurisdictions pose the possibility that a more direct and stricter regime may be legislated in the ACT in the near future. Property agents should ensure that they are aware of these implications.