The NSW government has just released new guidelines on underquoting, but how can agents know what price estimate to provide in hot markets like Sydney's?
The NSW state government has just introduced new guidelines for real estate agents to stamp out underquoting, but how can agents know what sort of price guide to give prospective buyers when the property market is as hot as it is currently in Sydney and Melbourne? "The government is obviously serious about this, they want to protect consumers but it is difficult at the moment for agents to set a price," says Dale Whittaker, chairman of the Estate Agents Co-Operative in NSW and principal at MMJ Real Estate Shellharbour City.
"Even with private treaty sales, they often get down to a mini-auction between a couple of competing purchasers and as a result, properties are going for more than the comparative market analysis would normally indicate so I think in that light, the regulations state pretty clearly that agents need to be careful in this area," says Whittaker. "I think most best practice agents are aware of that, and one of the key things they need to do is that if a property is listed for offers above $399,000 and the owners reject an offer of $410,000, then you should be changing all your advertising to reflect the offers above price guide. It should be going to offers over $410,000. If the situation changes or vendor feedback changes, you need to make sure your marketing material represents that. That's the proper course of action."
Whittaker says agents doing the right thing need to ask, "What does your estimate of market value say on your agency agreement with the owner, and what comparables do you use to ascertain that market value?" He says agents who are doing best practice will not be talking set price with a prospective purchaser, but rather proving prospective purchasers with the same sort of comparables that they have used in their documentation to determine the price with the vendor to see what the market is doing at the time. "That is the best course of action," he says.
Whittaker acknowledges it is difficult in a heated market for agents to comply with the guidelines, but says they need to make sure they cover themselves well by getting regular feedback from the owner, and having office procedures to keep their marketing material up to date. "Particularly in Sydney, and particularly where I operate in the Illawarra, we're commonly seeing properties sell in this area for 10, 15 percent higher than comparable market analysis would indicate from recent sales what it's worth," he says.
David Crombie, the CEO of the Estate Agents Co-Operative, said the group had worked with the NSW state government since early 2015 on the new guidelines. "We had sign-off on them in February, prior to the election," said Crombie. "We had no issue, from our perspective there is existing legislation in place that covers this, there's already fines in place. I don't think it's a widespread issue but there are agents that do [underquote]."