- Fair Trading is promising to penalise real estate agents found underquoting in a new blitz campaign.
- Some 14 fines were handed out on Saturday, totalling more than $21,000, with Fair Trading expected to begin showing up “on the ground” at auctions.
- The single weekend worth of fines represent 60% of all fines issued last year, as the industry becomes increasingly concerned with underquoting.
- Visit Business Insider Australia’s homepage for more stories.
Dodgy real estate agents run the risk of fines of up to $21,000 and forfeited commissions if they are caught as part of an industry-wide crackdown on underquoting.
As home buyers become increasingly frustrated by the hot property market, agents will face greater scrutiny from New South Wales Fair Trading on whether they are pricing properties accurately or deliberately low balling would-be buyers to increase interest.
The market regulator said it had issued more than $21,000 in fines to agents on Saturda during a blockbuster weekend of auctions.
In New South Wales, agents are required by law to present a fair price guide based on comparable recent sales in the area, updating it as necessary as an auction draws nearer.
At a time when homes are selling $1 million above the reserve price and prices are jumping quicker than they have in four decades, there looks like more pressure will be applied to agents to find those funding the numbers.
NSW Minister for Better Regulation and Innovation Kevin Anderson said he had instructed the market regulator to be “on the ground to crack down on illegal underquoting”.
The 14 infringements notched up last weekend was the first sign the regulator is making good on the promise. Data obtained under the Freedom of Information (FOI) Act shows that over the whole of 2020 just 23 fines for underquoting were issued. That’s despite almost four times as many complaints being formally lodged.
In fact, since underquoting rules were strengthened in 2016, the rap sheet reads light on penalties. Just 238 fines have been handed down in the last five years, off the back of 689 complaints. Just one agent has actually been prosecuted and convicted during that time.
Fair Trading has its work cut out for it. To determine not only that underquoting has occurred but that it was done with intent is a difficult. It is even harder in major markets like Sydney and Melbourne when there’s fierce competition among buyers locked in battles to outbid one another.
On the other hand, the potential payoff for agents to break rules would appear to outweigh the risks. With agents earning commission on sales in the range of 1.5% to 3%, incentives are skewed towards inflating final sale prices.
A buyer who might be forced to pay an extra $50,000 at a busy auction is essentially putting thousands of dollars extra in an agent’s pocket at its conclusion. When homes are going for hundreds of thousands of dollars above reserve, an average fine of just $2,200 may not exactly scare agents straight.
While it may not always be responsible for bumper sale prices, underquoting isn’t a good look at a time when prices are already moving several percentage points higher in a single month.
One auctiongoer reported a dozen auctions held last month in Sydney’s eastern suburbs to Business Insider Australia where prices had blown expectations out of the water, with at least a few suspected of underquoting.
Another said the feeling amongst first homebuyers is already “gloomy” without having to second guess price guides.
“Watching the Sydney house price explosion, standing in inspection queues, and listening to fellow buyers there is such despondency, such despair, as week after week a property sells for hundreds of thousands over reserve,” she said.
“In this moment of real estate mindfuck, I would suggest, ‘price guide unknown’.”
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