WHY ONE PIECE OF PAPER COULD SAVE YOU A MOTZA
Why one piece of paper
could save you a motza!
All about quotation guarantees
With under quoting still rife in New South Wales, one way to protect yourself is to request a home seller’s protection guarantee
Underquoting is a dishonest practice used by some real estate agents. It occurs when an agent deliberately quotes a price that is below their own estimated selling price and is done in an effort to drive interest so they can sell your property as quickly as possible and pocket the commission. It’s quite clear why they do this when you consider that the average commission they receive is 2% to 3%, which can equate to $10,000 to $15,000 on a $500,000 sale. The benefits for the agent are substantial.
“Although under quoting is illegal in most states, including New South Wales, it is still practiced by more unscrupulous agents. Efforts have been made by various state bodies, including Fair Trading NSW, to stamp out this practice but, particularly in a rising market, some agents find sneaky ways to try to get around the rules,” warns Natasha McElwaine, McElwaine Estate Agents’ Founder and Director.
“By law Fair Trading NSW insists that the highest price in a price range does not exceed the lower price by more than 10% (for example, $500,000 to $550,000). The trouble with this is that some agents manipulate sold prices of comparable properties and quote price ranges to suit their own agendas. Such agents don’t compare apples with apples. Instead they compare, say, houses with townhouses or villas,” says Natasha
State governments are now onto this. For example, the Victorian government has recently revised its underquoting laws. Selling agents are now required to compare properties more accurately by providing buyers with three recent comparable sales that are of similar land size, internal floor size, construction materials, architectural styles and layouts.
However, as reported in a Financial Review article, Cate Bakos, president of buyer's agents lobby group REBAA, said the changes didn't go far enough."I think updating the laws and enforcing tougher measures is a good thing," she said. “However, I think the changes are still insufficient to quash underquoting practices. It still relies on the agent selecting comparable sales that are genuinely comparable."
Bakos said the ‘minor’ changes to the underquoting law wouldn't stop agents from cherry-picking abnormal sales to justify the lower price range they quote.
What can be done?
Real estate agents have ‘standard’ contracts. These legal agreements are designed for the benefit of the agency – not you. Make sure you carefully read any contract provided to you. You could even have your legal representative check it over for you. Be aware that once you signup with an agent, if the selling price is less than the price you were quoted, you lose out. There is nothing in the ‘standard’ real estate agreements that compels agents to honour their quotes.
To protect yourself from underquoting, it’s worth doing your homework by researching comparable sales via realestate.com.au or Residex, which offers a free suburb report. You will be able to access suburb profile reports that will detail the sale prices and auction results of neighbouring properties. Make sure you only consider the data of comparable properties.You can also try speaking with residents in the area and getting valuations from other agents.
However, the most effective way to protect yourself is to get a signed quotation guarantee, known as a Home Sellers’ Protection Guarantee, from the agent stating that the agent won’t be paid unless the low end of the price range is guaranteed.
If you receive a quote from a tradesperson or other professional services provider, they have to honour it. Why is it that an agent can offer you a written quote but not honour it? This quotation guarantee can include a clear condition that if your home sells for less than the bottom range of price quoted by the agent then you will not have to pay the agent. It should be attached to the standard agreement that your agent supplies you with.A professional, truthful agent will have no issues with signing such a document.
And don’t be concerned about an agent’s reference to ‘the market’ as an excuse for them not to sign a quotation agreement. Yes, markets go up and down, but you will have, by law, been provided with a quote that outlines a 10% price range. The quotation guarantee ensures you will not pay the agent if your home sells for less than the low point of this price range.
What if it happens to you?
If you believe an agent has underquoted the value of your home, then you need to be proactive. Contact your local authority, such as Fair Trading NSW, and file a complaint. Be prepared to provide evidence, such as providing comparable sale prices.If an agent is caught for underquoting in New South Wales can they lose their commission and may also face fines of up to $22,000.
You’re welcome to email us today to obtain a copy of our Home Sellers’ Protection Guarantee.
McElwaine Estate Agents always acts in our clients’ best interests.Our inspired and world-class model is founded on creative and unique strategies that capture the emotional heart of your property and is backed by an experienced team that offers genuine care for every person we partner with.