- New changes to the regulation of real estate agents under the Property Stock and Business Agents Act 2002 are one step closer to ensuring a more efficient and transparent real estate market.
- From 1 January, real estate agents are prohibited from engaging in underquoting when selling residential properties.
- Agents now have a continuous obligation to ensure their estimated selling price remains reasonable. If the market changes, the agent must update the estimate. Evidence must also be provided to support the basis for the estimate.
- Agents must no longer use phrasing like ‘offers over $500,000’ and whenever an agent quotes a price (single figure or range) they must keep a written record of it for three years and include the address of the property, a time-stamp, and the figure(s) quoted.
On 1 January 2016 amendments to the Property Stock and Business Agents Act 2002 commenced. The changes prohibit real estate agents from engaging in a practice called underquoting. Legal practitioners in regular contact with agents and when acting for vendors may need to field questions of a general nature in relation to the changes.
NSW Fair Trading explains underquoting as follows:
‘Underquoting describes when an agent understates the estimated selling price of a property. This can cause interested buyers to waste time and money on inspecting properties, getting reports and attending auctions based on misleading estimates of the selling price.’
The new laws apply to agents who are selling residential properties (as defined in the Conveyancing Act 1919 s 66Q). The changes mostly concern the way in which agents are allowed to represent the estimated selling price.
In agency agreements, the agent’s estimate of the likely selling price of the property must be included. This can be stated as a single figure or as a range. If the agency agreement contains a price range, the upper figure may only exceed the lower figure by 10 per cent (s 72A(1)-(2)). In Victoria, s 47A of the Estate Agents Act 1980 introduced the same 10 per cent rule in 2004. The NSW legislature has taken reform in this area further.
Agents now have a continuous obligation to ensure their estimated selling price remains reasonable (s 72A(3)). What this means is that as the market changes the agent must update the estimate.