Few things are as elusive as the ticket price on residential real estate in NSW. House hunters in the Premier State are accustomed to homes either advertised without a price or selling for a sum substantially different from what was advertised.
But in a major change for the industry, the Minns Labor Government has passed legislation to crack down on underquoting with the goal of creating a fairer property market.
The new laws, which passed parliament on Wednesday, will mandate a price or price guide on all advertising, require agents to publish a statement of information to help buyers better understand how prices are calculated, and is doubling penalties for real estate businesses that engage in dummy bidding at auctions from $55,000 to $110,000.
Agents will also be required to revise the estimated selling price of a property throughout the campaign, for example, if a higher offer is rejected by the seller.
These changes lag behind the vastly different legislation already in place in Victoria and Queensland.
South of the NSW border, Victorian agents are required to publish a public statement of information revealing an indicative price based on comparable sales. Recently, the Victorian Government has proposed further legislation a reserve price to be disclosed seven days prior to auction.
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New NSW underquoting laws passed parliament on Wednesday. Picture: Getty
On the flip side, in the Sunshine State, it is illegal for a seller or their agent to give any price guide for auction properties, although they may provide comparable sales with the vendor’s approval.
The rules may be polar opposites but the goal, according to individual state governments, is the same – to create clarity for buyers. Agents, however, aren’t all sold on the idea.
What’s been legislated in NSW
In a statement on Wednesday, the government said the new laws will:
- Significantly increase penalties for underquoting and dummy bidding,
- Mandate a price guide on all advertising, and
- Require agents to publish a statement of information that includes comparable sales and the suburb’s median sale price.
Agents will also be required to revise the advertised price throughout the campaign, which cannot be lower than a previously rejected written offer or the highest unsuccessful bid at an auction.
Exactly when the changes will come into effect remains unclear, with the government indicating a period of consultation will first take place.
Minister for Better Regulation and Fair Trading, Anoulack Chanthivong, said the changes will stamp out underquoting.
“The focus of the Minns Labor Government is simple: a fair property market that works for everyone,” he said.
“Our underquoting reforms will ensure homebuyers aren’t wasting their valuable time and money during one of the most important moments of their lives.”
The government says the changes will improve transparency for buyers, but industry groups say the sale price is ultimately decided by the market. Picture: Getty
He emphasised that the new laws would improve honesty and transparency throughout the buying process.
“Because whether you’re buying your first home or are looking for somewhere with a bit more room for a growing family, you should know exactly what is or isn’t in your budget.
A NSW Fair Trading spokesperson said the proposed provisions include the publication of a price or price range.
“Agents would be required to keep advertised prices up to date, including updating online listings quickly if the estimated selling price changes or new price-relevant information emerges,” the spokesperson said, citing rejected offers or auction outcomes as examples of price amendments.
“These reforms sit alongside stronger underquoting prohibitions, including a ban on advertising below a rejected offer or highest unsuccessful bid,” they added.
Tim McKibbin, CEO of the Real Estate Institute of NSW, agreed that a purchaser should be equipped with all the facts.
“We all want information when making our biggest investment, but the person selling also wants the maximum return on their investment,” he said.
REINSW CEO Tim McKibbin said the amount of underquoting that happens, and the perception of the amount that happens, is very different.
“When I look at these changes, I struggle to understand whether or not the vendor is being treated as a consumer. Is there anything wrong with a vendor wanting to maximise the price?”
He said the very nature of real estate is that every home is unique.
“Unfortunately, governments tend to do things that are politically popular rather than clever. We don’t want to see a situation where you put a barcode on a property, scan it, and see what it’s worth,” he said.
“Every property has attributes that are more valuable to some than others. Ultimately, price is subject to market conditions.”
Victoria on the verge of tighter pricing rules
Almost a decade ago, Victoria introduced mandatory pricing following widespread concerns that buyers were being misled by unrealistic advertised prices.
New rules could now require a published reserve price a week before auction day. If passed, the reforms could commence as soon as October 1.
Kevin Chokshi, auctioneer and director of Ray White The Bayside Group, said enforcing price guides in Victoria has had its advantages and disadvantages.
“The pros are buyers have a guide, but the con is sometimes it can give the buyer false hope because the market could naturally drive prices up. It could also give a seller false hope. The whole point of an auction is to generate competition and for the market to decide the price.”
Publishing reserve prices isn’t a catch-all solution, according to Mr Chokshi.
“There’ll be some winners and some losers, but the narrative that it’s going to help buyers is not the right narrative,” he said.
“It looks good on paper when published, but I don’t think it’s really helping the buyer or the seller. [Government] is trying to find a logical solution to an emotional journey. It’s over-complicating a relatively simple process.
“In my career, I’ve seen three prices; a dream price most sellers hope to get, a price they’re actually willing to sell at, and then a third price – which is decided on the day. This latest change almost takes away the opportunity for the seller to keep that number fluid and change it based on what they see on the day.”
Queensland’s property pricing story
In 2014, the Queensland Government’s goal was to eliminate underquoting by removing price guides altogether, including verbal indications.
Peter Burgin, Ray White Collective chief auctioneer based in Queensland, said eliminating price guides can make purchasers feel like they’re flying blind.
“If there’s something we can give a buyer that helps them understand reasonable value, then that’s a good thing. It’s not about misleading anyone, it’s about helping buyers purchase property,” Burgin said, adding that Queensland buyers are left to do their due diligence by accessing the same information and data reports available to agents.
In Queensland, price guides are banned on properties heading to auction. Picture: Getty
“We don’t want to do anything that’ll make people not participate in, or lose faith in the process. But buyers are frustrated and I feel that government is focused on the wrong things,” he explained.
“The frustration in the market is not around auction properties, it’s home for sale by private treaty that get multiple offers behind closed doors. Buyers have no idea where to make an offer because they can’t see other offers, whereas with an auction they have transparency.
“That’s where 80% of complaints come from. [Government] is focused on auctions being the only yardstick for problems in real estate, and they’re actually the best part about real estate.”