Underquoting is a marketing tactic estate agents use to drum up interest.
There are laws against intentional underquoting in New South Wales and Victoria.
If you suspect an agent is underquoting you need to speak up and report them.
What is real estate underquoting?
Although the majority of Australian real estate agents act in good faith, you may come across a sneaky tactic called underquoting.
Sometimes referred to as "bait pricing", underquoting occurs where a real estate agent markets a property for less than the genuine sale price in order to attract greater interest from potential buyers.
According to a recent investigation, 30% of properties at auction were sold for 10% or more than the quoted price between October 2023 and July 2024.
However, this can also happen naturally due to high competition. Real estate agents are only deemed to have broken the law if they intentionally underquote.
Why do real estate agents underquote?
By attracting a larger number of buyers these estate agents believe it will create a greater sense of competition for the property. When the property is sold for a higher price, they expect buyers will think it is due to a heated property market and the competitive nature of auctions.
However, some argue that agents would be better off by quoting accurately to attract buyers who have the financial means to buy the property rather than those who are unable to afford the price range that the vendor desires.
Underquoting methods
Step-quoting. Some of the agents who use this tactic will originally advertise a property at a low price to attract potential buyers and then gradually increase the price up until auction day or the proposed sale date. This is known as step-quoting.
Removing prices. Some real estate agents will also remove estimated sale prices from online advertisements and only provide a verbal guide to potential buyers, while others may claim they cannot forecast what a buyer will be prepared to pay on the day.
Why is underquoting bad?
The practice of underquoting is misleading and unethical because the advertised price must be one that the vendor is willing to consider and the price must reflect market conditions.
NSW Fair Trading says its rules around underquoting are to prevent buyers spending time and money on inspections and property reports for properties out of their price range.
Beyond that, underquoting creates frustration amongst buyers who anticipate paying a certain price for a property only to be outbid or disappointed at auction.
It also leads to mistrust between buyers and agents as many buyers are unwilling to trust the agent's quoted price prior to the sale.
Expert insight: Why underquoting is becoming less common
"Underquoting can certainly happen - particularly when the real estate market is struggling for direction and agents are having difficulty selling properties. In these circumstances agents may use deliberate underquoting as a method of trying to draw in more interested parties to a listing. However underquoting is becoming less and less of a problem for two main reasons. Firstly, when a market is relatively strong and competitive, inaccurate prices that may initially appear to be underquoting may in fact be actually just a product of a higher-level of competition. Secondly, these days there's an app or website for just about everything, including finding out the realistic price of a property."
When it comes to buying in a competitive market, it pays to do your homework. Here are some ways you can protect yourself from underquoting:
Research comparable sales. Visit sites like realestate.com.au or Corelogic to access suburb profile reports that will detail the sale prices and auction results of neighbouring properties. Only consider the data of comparable properties.
Consult professionals. Speak to real estate agents or buyers agents that aren't involved in the sale as they'll be more likely to give you a true estimate of the price. Speak with other residents who are familiar with the area. You may want to consider using the services of a buyer's agent.
What should I do if I suspect an agent is underquoting?
A real estate agent is legally only underquoting if they did so to intentionally mislead. If you believe that an agent has intentionally underquoted the estimated sale price, you can report them.
The authority on this lies within each state (e.g. NSW Fair Trading, Consumer Affairs Victoria).
Consult your local authority and file a complaint. When doing so, ensure that you have evidence to suggest that the agent has been reckless with their quoting, such as providing comparable sale prices.
What obligations does a real estate agent have?
Real estate agents have the following responsibilities when selling or marketing real estate:
To make honest and reasonable estimates of sale prices
To maintain records to demonstrate what information they used to reach estimates
To maintain records of any conversations where estimates are adjusted
Price guides
When advertising a property for sale, there are certain rules around the way real estate agents can advertise the property price.
These can vary by state but typically:
The agent may advertise the price either as a single figure or as a range of up to 10% (e.g. $600,000 - $660,000).
They can't use terms such as 'from' or 'offers above' or '+' (e.g. $700,000+).
Frequently asked questions about underquoting.
The genuine estimated selling price is the price that is documented in the agency agreement that represents the agent's true estimated selling price. If a real estate agent advertises an estimated selling price in the agency agreement that is not consistent with their true estimate of the likely selling price for the property, then this may be considered false or misleading.
Typically, the seller's minimum expectation should be disclosed in writing before the marketing campaign commences.
While each agency will have their own practices, some of the ways agents determine a selling price are:
Recent comparable sales. This may include any changes in the market since the comparable property was sold or variations between the comparable property sale prices.
Property valuations. Understanding the recent values of the property is key when deciding the sales price.
Location factors. An agent should carefully consider average property prices in the area, supply and demand factors including days on market (DOM) and vacancy rates.
Vendor expectations. The agent should include information regarding any specific instructions in regards to marketing campaign, preferred method of sale and the vendor's genuine price expectations.
There are laws around underquoting in New South Wales and Victoria.
In New South Wales, a real estate agent could be issued with a penalty infringement notice of $2,200. Further action could be taken depending on the circumstances. If an agent is found guilty in a court trial they could face a fine of $22,000. They may also lose the full commission and fees for property/properties underquoted.
In Victoria, real estate agents could face a penalty of at least $36,000. They may also lose commission for selling the property in serious cases.
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio
Rebecca's expertise
Rebecca has written 201 Finder guides across topics including:
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