Searching for a new home can be a frustrating experience. A few cycles of searching, inspecting, negotiating and then missing out is enough to make the most patient person agitated. Multiple legal and inspection charges make it, not only depressing, but costly as well.
The NSW government is introducing new legislation to limit one area that has the public upset. Underquoting by real estate agents often propels prospective buyers through the contract checking, pest and building inspection report loop only to find the intended property is not in the right price range to start with.
The job of a real estate agent is to increase the public’s interest in their listings. The easiest way to do this is to suggest that the property is cheaper than it really is. This is a good idea for both the agent and the seller by increasing interest and the number of bidders. Hopefully, for them at least, this can increase the selling price. But for anyone who has spent the time and thousands of dollars doing due diligence, it can be doubly frustrating. When a property sells for way over what they were told, or what was advertised, they realise they were just being used as auction fodder.
The new legislation being introduced in the NSW state parliament will make it illegal for real estate agents to underquote the selling price. Specifically, the price on the listing agreement with the vendor must not be higher than the figure used when quoting a price estimate or used in advertising. The legislation is currently being debated now and expected to introduced early in 2016. The specific clauses included in the bill state that a selling agent must:
- include their estimate of a property’s likely selling price in the agency agreement
- record the evidence that informed their estimate and provide the vendor with this evidence in writing
- ensure a price range is no greater than 10% of the bottom figure (eg. $500,000-$550,000)
- ensure advertising does not include any imprecise or unclear statements such as ‘offers over’ or ‘offers above’ or $XXX,000+. Importantly, an agent must never include any price in an advertisement that is less than the estimated selling price in the agency agreement
- record all quotes provided while a property is marketed
- notify the vendor if the original estimated selling price is revised. The agent will be required to provide the vendor with evidence (eg. market feedback) for their revised estimate
Queensland, and some other states, have already introduced reform that any property going to auction will need a pest and building inspection report to be given to all interested parties. The report is provided to all at the seller’s expense. This will save on the complete waste of money of up to half a dozen people paying out the $400 – $600 for a pest and building report. This is not before the NSW House of Reps but will probably get there in time and is also a good idea.
These new rules are before the NSW state parliament at present and expected to be legislated early 2016. This will be an advantage for buyers in the current strong market and make the process of purchasing more transparent. As a buyer’s agent helping clients look for Byron Bay real estate, I often see misleading listing prices. Part of my role is to do accurate research to fully inform the buyer on a property’s fair market value. These new regulations will assist buyers and I support them.