ACT government uncovers instances of underquoting Canberra homes sold via auction

An ACT government operation has uncovered several instances of real estate agents underquoting properties sold via auction in Canberra.

Industry stakeholders believe the illegal practice is minimal but are urging prospective buyers to do their research rather than introduce new rules to curb the problem.

Access Canberra inspectors investigated 25 properties scheduled for auction in September 2016 and identified 10 instances of underquoting.

Underquoting was defined as an agent misleading a prospective buyer about the likely selling price of a property for sale.

“The agent and salesperson must act honestly, fairly and professionally with all parties and they must not mislead or deceive any parties in negotiations or a transaction,” an Access Canberra spokeswoman  said.

Agents found to have broken the rules have been contacted and sent education material.

Earlier this month a Victorian government crackdown found a number of Melbourne real estate agents had deliberately underquoted properties for sale, in some cases by hundreds of thousands of dollars.

A competitive auction with fierce bidding and a sale price that exceeds the reserve is not in itself an underquote but can cause frustration among prospective buyers.

Canberra Property Buyer Solutions principal Tom Duffy said there were some instances of underquoting in the ACT, however these were rare.

He said a good agent should have an idea where a property was valued in the market; listen to feedback from prospective buyers; and negotiate a reserve price with the vendor.

“But a serious buyer is not going to tell an agent exactly what they’re willing to pay,” he said.

In Queensland controversial legislation makes it illegal for a vendor or agent to produce a price guide for buyers, while NSW has introduced restrictions on vague price guides.

ACT price guides are less restrictive and, like in many states, a reserve price can be set the day of the auction.

Access Canberra received four complaints about underquoting last year but none of them were formalised.

The spokeswoman said the practice could be difficult to prove as there was no restriction on the size of the estimated price range set by the agent, and the seller was not obligated to tell the agent their reserve price before auction day.

Mr Duffy said it was difficult to set a reserve price early, given the range of factors that inform the amount.

He said prospective buyers needed to do their own research prior to registering to bid at auction – or enlist help.

Real Estate Institute ACT chief executive Ron Bell said Canberra’s shortage of detached homes had created a highly competitive environment and lifted prices.

“We have about 2000 properties on the market, when we should have 4000. Most of those are apartments and townhouses and most people want a detached house,” Mr Bell said.

“So it’s pretty hard to work out what people are going to pay.”

Capital Buyers Agency’s Claire Corby also acknowledged instances of underquoting however, she said prospective buyers should not solely rely on price guides.

“Sometimes agents genuinely don’t know what buyers are willing to pay in the current market – there may be a lack of comparable properties or it may be a highly emotive property in a competitive price bracket,” she said.

“Educating buyers seems to me to be the solution, rather than introducing new laws which other states have demonstrated only leads to players adjusting how they play the game and even more uncertainty for buyers,” she said.

For more information, visit accesscanberra.act.gov.au or reiact.com.au