As of January 1st , 2016 there will be new legislation that will endeavour to rule out unscrupulous underquoting practices across NSW. I was present at a training session run by the REINSW with 50 or so selling agents and Principals. Underquoting has been a bug bare of many buyer’s over the years and on face value they may see these changes as ‘sticking it’ to the selling agents. However, I feel that it may be the buyer who will suffer.
Similar to the dummy bidding laws that were introduced in 2004 these laws are being introduced to eradicate agents that continually do the wrong thing. Have the dummy bidding laws worked? Yes, but to a degree. The industry will be set for a shake up and the general consensus from the agents was that those that are doing the right thing will be ok. However, some of the changes will be very time consuming for busy agents.
As of January 1st these are the practices that all agents must now adhere to:
- They must keep file notes of all communication with prospective sellers and purchasers. Every time an agent picks up their phone or has a conversation regarding price, even down at the local pub, the agent must keep a file note. The note must have the buyer’s name, number, time and date of call. This is going to be a big adjustment to many sales agents.
- Provide reasonable evidence to the vendor regarding price estimate. When the new laws come into place an agent that lists a property to sell must have evidence to support exactly why they quoted the estimated selling price stated on the agency agreement. However, they do not have to disclose what is on the agency agreement to buyers. The smart agents will continue to use comparable sales when they can.
- They must be vigilant and revise evidence accordingly. If an agent receives an offer or another property sells and it compares to the property that they are selling they must keep notes, let their vendor know and change the quoting accordingly. If they are found not to keep notes they can be fined.
- Agents can no longer use offers over or plus signs. The good news here is this is a great reform for buyers. It has been ridiculously confusing for buyers when they see offers over and the property sells for so much more. The bad news is agents may not disclose any price – by law they don’t have to. So when you ring up and ask about a price they may not give you one and by law they do not have to. This is very bad news.
- They have to use the estimated price range. This has not changed at all but there are a number of selling agents out there that that will list a property for a price and then quote under what is on the agency agreement. Now, agents will have to have their agency agreement inline with what they are quoting. This will help a lot with underquoting.
- Domain and Real Estate.com are coming on board as well so if you put a price into the search engine it must match the estimated selling price. When an agent uploads a property into the system this is seen as “publishing” so with the wrong price range it can be deemed as misleading.
If at any stage they are seen to be underquoting or misleading a buyer regarding price they will be faced with a $22,000 on the spot fine and can be fined without going to court.
A shake up is due and I think that these changes will perhaps stop agents from even telling us any price over the phone. I imagine some agencies will work on disclosing a price guide wherever possible and others will most likely not disclose price at all.
These reforms are being put in place to stamp out bad practice but I think at first the buyer will suffer. I think it will be harder to get price guides from agents over the phone so it may be confusing at first. Just like the dummy bidding laws changed the industry in 2004 I believe this shake up is a necessary one. Those that are doing the right thing will continue to do so and those that aren’t may need to start looking at a different industry.