How to Protect Yourself Against Real Estate Underquoting

What would it be like to find your dream home, after months of searching and tireless research, the one that’s in the location you want, that’s within budget, and is everything you’re looking for in a home? Now how would it feel to discover that you’ve been deliberately misled? That after all that time and effort, and the hundreds of dollars spent on building inspections, pest inspections and contract reviews, that this time and money was wasted on a property that was always outside the realm of possibility? How would it feel to watch your dream home get sold to someone else for far more than you had reason to believe it would?

For many Australians, falling victim to underquoting is not only a reality, but a defining experience of their search for a property.  Chances are if you’re buying or know someone who is buying property, you’ll find the same horror stories time and time again of making an offer on a house only to discover its being sold for sometimes up to double the listed price.

Not only is this devastating, it’s also illegal.

Underquoting happens when a selling agent will deliberately list a property for less than the actual projected selling price. There are a number of reasons why this may occur. Underquoting on a property, especially in Australia’s fiercely competitive market, can maximise interest and give the vendors a sense of confidence in their selling agent- even if this confidence is based on appearances, rather than actual competence. Secondly, maximising competition can drive up prices. This is the most obvious reason for underquoting- the more perceived interest there is in a property, the more likely buyers will be swayed to make a higher offer.

Surely this can only be good for those selling their homes, right? Well, actually no.  Not only are there very real legal ramifications for underquoting on a property, but this practise is encouraging bad selling agents to use deception when dealing with both their clients, and with potential buyers.

Underquoting is illegal. As recently as November of 2017, a Melbourne agency was fined $160,000 for deliberately underquoting on listed properties. Another, barely a week ago, was charged an unprecedented $800,000 in fines for underquoting on 22 properties. In 2016, a $300,000 fine was imposed on an agency for false representations made on up to eleven properties. And, in the first six months of 2017, six Victorian agencies received fines for the illicit practice. 2017 has seen Consumer Affairs Victoria crack down on underquoting, introducing strict rules for listings. All listed residential properties must have a listed estimated price, along with the prices of three comparable properties of a similar value, and the median housing price for the suburb the property is located in. Terminology such as “offers above”, “from” and “+” are also banned from price listings.

So how can the average consumer protect themselves from falling victim to underquoting? The most sensible steps prospective home buyers can take include doing your research, and being wary of listings that seem too good to be true. Going to as many house viewings as possible and getting an independent understanding of what a house is worth will set you in the most reliable position to figure out whether you’re being duped.

To learn more about underquoting and steps you can take to protect yourself, visit Consumer Affairs Victoria.

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