From 1 January 2016 changes to the Property , Stock and Business Agents Act 2002 commenced so as to prohibit real estate agents from engaging in underquoting i.e. when an agent intentionally understates the estimated selling price of a property which can result in potential buyers wasting time on inspections and money on property reports and legal fees.
The new changes, which apply to residential property only, include the following:
With respect to vendors
1. In an agency agreement with the vendor the agent must include an estimate of the likely selling price which may be a single figure or a price range provided there is only a 10% difference between the highest and lowest prices;
2. An agent is also required to ensure the estimated selling price remains reasonable and must revise it if it ceases to be reasonable; and
3. At the time of providing an estimated selling price or a revised one an agent must provide the vendor with evidence to support the price estimate;
With respect to purchasers
1. An agent is prohibited from publishing an advertisement regarding the sale of a property indicating or suggesting a price less than the estimated selling price given to the vendor;
2. Also, an agent must not use phrases such as “offers above” or “offers over” a certain price or similar symbols or words like “ +”;
3. The definition of publishing an advertisement includes inserting an advertisement in any newspaper, publicly exhibiting an advertisement in view of persons passing by, delivering the advertisement by way of document sent to any person, showing the advertisement on a website or sending the advertisement by e-mail; and
4. A real estate agent is prohibited from making a statement, while marketing a property, representing to potential buyers that a property is likely to be sold for a price less than the estimated selling price given to the vendor. In such a case, the agent can be ordered to forfeit part or the whole of the commission earned.
Any breach of the above requirements is an offence carrying a penalty up to $22,000.00.