Navigating Underquoting Laws: What Every Agent Should Know

Underquoting is in the spotlight with many media reports highlighting suspected instances in the Sydney market. But is it actually “Underquoting” or a case of the market doing things that Agent’s cannot predict?


If you only have a minute to read this article, this is what you should know:

  • Risk of Legal Non-Compliance: Real estate agents might be unknowingly violating Underquoting legislation, putting their licenses and reputation at significant risk.
  • Unintended Highlight on Non-Compliance: Celebrating sales that far exceed the estimated selling price could inadvertently spotlight an agent’s failure to adhere to legal requirements, inviting scrutiny and potential investigations.
  • Compliance is More Complex Than It Seems: Complying with Underquoting legislation involves constant revision and justification of the ESP based on a range of market factors and buyer feedback, not just setting a price range.
  • Legal Repercussions Are Real: Falling afoul of Underquoting laws can lead to serious legal consequences, including fines and damage to your professional credibility.
  • Transparency and Diligence Required: Agents must maintain transparency, act professionally, and diligently monitor their pricing strategies to avoid the pitfalls of Underquoting and ensure fairness in the real estate market.


Recently, we sat down with Sarah Heuvel, Partner in our Real Estate team, who was recently involved in several NSW Fair Trading investigations concerning allegations of Underquoting and she shares her findings below. Read on to understand the intricacies of Underquoting legislation and how to safeguard your practice from unintentional non-compliance.


Sarah, you’ve had a few sit-down interviews with NSW Fair Trading in recent weeks, defending our clients against allegations of Underquoting. What can you share about these interviews?

I think I must first clarify what exactly is “Underquoting” prior to delving into what NSW Fair Trading are focusing on and what the public misconceptions are. Section 72A of the Property and Stock Agents Act 2002 (the Act) states in laymen terms:

  1. An agent cannot enter into an agency agreement with a vendor unless the agreement states the Agent’s ESTIMATE of the LIKELY selling price of the property. This is referred to as the ‘Estimate of Sale Price’ or ‘ESP’. It is important to know that this is an estimate and is based on the Agent’s opinion as to what the property will likely sell for. It is not a guarantee.
  2. The ESP can be expressed as a range, but it cannot exceed 10% between the two figures. For example, if the Agent’s estimate is $1,000,000, a range of $1,000,000 – $1,100,000 can be set. If the range is set as $1,000,000 to $1,500,000, the agent would be in breach of the legislation as that range is more than 10% from the bottom figure. Thankfully, we don’t often see any examples of breaches of this.
  3. The Agent must, during the campaign, ensure that the ESP is, and remains, a REASONABLE estimate of the likely selling price of the property. Now this is where it gets tricky. Who gets to determine what is reasonable? Because what you and I think is reasonable may not be what your neighbour thinks is reasonable. This section of the Act requires Agents to regularly revise their ESP and change accordingly – to either increase or decrease it. Reasons for the change include buyer feedback, changes to interest rates, or the vendor rejecting an offer within the ESP. If the Vendor rejects an offer that is above the bottom of your ESP range, you must increase your ESP.
  4. If the Agent determines that their ESP is no longer reasonable, then they are required to revise it. There is no requirement for the vendor to agree to a revision of an Agent’s ESP – the Agent, however, is required to notify the Vendor in writing and amend the agency agreement. This does not mean the actual agency agreement is amended but rather, a variation document is completed and signed by the agent, provided to the Vendor, and kept on file for inspection if needed.
  5. When an Agent revises their ESP, they must provide the Vendor with evidence of the REASONABLES of the new ESP. Evidence can include new comparables if the market has changed, buyer feedback which indicates that the property is either more or less desirable than first thought; or external factors like rate rises.


It seems that what you’ve explained is pretty straight forward – but why has this gotten so much media coverage lately?

We often see circumstances where an Agent is guiding a price, but the subsequent sale price far exceeds what has been advertised. Buyers are understandably left frustrated that they have spent time and money exploring the possibility of a purchase when it was never within their budget. In some cases, they fall in love with the property only to be left bitterly disappointed. And whilst an Agent may want to celebrate their success and the result achieved for the Vendor, they should be considering what the perception is if they advertise that it was sold hundreds of thousands above the reserve. That information could potentially shine an unintentional spotlight on them and leave them open to an inspection from OFT.


So if an Agent advertises that a property has sold far in excess of the guide or reserve, have they underquoted?

If the Agent has not quoted a figure below their ESP, then they are not in breach of any Underquoting legislation. The Agent’s ESP, however, is not something that is required to be disclosed to buyers and it is just the Agent’s opinion of what the property will likely sell for. It is not a guarantee.

If an Agent is doing their job properly, they must be basing their ESP off a range of factors including the sale of comparable properties, buyer feedback, their experience, and any other factors that they deem relevant. This can include the property’s attributes, its negative features, its location, and any material facts. It is important to note that an Agent’s opinion is not based solely on comparable properties. Whilst two properties may appear similar on paper, there may be things the Agent knows at the time of pricing that buyers don’t – which may ultimately affect the eventual sale price.

What Agent’s cannot predict is a buyer’s emotional attachment to a property. If a buyer has been in the market for a while and continuously missed out or has already sold and is under pressure to buy, these can drive prices up. Additionally, if a property appeals to a buyer’s emotion, that buyer may pay what others would deem to be a high price for that property. These things are not able to be ascertained or predicted by an Agent prior and are therefore not instances of Underquoting.

If an Agent has an ESP of $1,000,000 and they are quoting $900,000, then yes they are Underquoting and in breach of the legislation. In every matter I have been involved with, there has been no instances of actual Underquoting. Instead, Agent’s may have quoted lower than they should have, based on the comparables at the time of entering into the Agency Agreement. They may also have not revised their ESP enough during the campaign. Both of these oversights could result in a breach of section 72A of the Act.


If an Agent amends their ESP, how does the public become aware of this?

Unlike our counterparts in Victoria, there is no requirement in NSW to disclose the ESP to any prospective buyer. Section 73 of the Act requires Agents to not publish an advertisement for the sale of a property that indicates or suggests that a selling price is less than their ESP. They also cannot advertise words like “offers above” or “offers over” a specified price or range. If an Agent revises their ESP they must, as soon as practicable, take all reasonable steps to amend or retract any advertising to change the price accordingly. This may include sending out email correspondence to each person who has enquired notifying them of the price change.


In your view, what are some things Agents can do to ensure that they are compliant with the legislation whilst ensuring transparency and acting in the Vendors best interests?

Again, the Act references the term “reasonable” when determining an ESP. The difficulty I have with this term is how subjective it is and how it will differ from agent to agent, area to area, experience to experience. What I therefore can suggest is some things agents can do to assist them in determining a REASONABLE ESP and being able to adequately justify that in any investigation they find themselves the subject of.


  1. There is no guidance over how many comparables you must use when determining your ESP or how far back you should go. Some Agents use 5. Some use 10. Some look at the last 6 months of sales whereas others look at the last year. There is no science to it. We suggest the more comparables you can reference the better as it becomes a matter of evidence to substantiate your likely sale price.
  2. Revise your ESP weekly. This does not mean it has to change – this just means that you have had a documented (preferably, written) discussion with the Vendors referencing the weekly feedback and any new comparables that you can now use,to justify whether your ESP is still what you believe to be reasonable.
  3. In some instances, the focus on a sale price is based on the property’s features – ie 3 bedrooms, 1 bathroom and 1 parking. If you are using 2 bedrooms as comparable properties, you need to be able to justify why. If it is due to location, outlook, age, work needing to be done etc, all those reasons need to be explained to the Vendors in writing and evidence of that kept in the file.
  4. Any time you revise your ESP, whether you increase or decrease it, it is simply not enough to say “buyer feedback” as the reason for the revision. OFT are understandably of the view that a professional real estate agent, with years of experience, should know their market and know what other properties have sold for and use that as their basis for their ESP and not solely buyer feedback. If the buyer feedback is lower than your ESP and you decide to revise it down, it is recommended that you preface it with any other comparables that support that change because your original comparables are now arguably redundant.
  5. If you have verbal conversations with your vendors about price, they must be documented via a file note or similar in your file. A contemporaneous file note can be relied upon as evidence if we are ever required to produce documents.
  6. OFT want to see ‘evidence’ as to how agents are coming up with these ‘reasonable’ ESPs. It is simply not enough for an agent to claim that they did not know the property was going to sell so far above their ESP, or that two emotional bidders wouldn’t give up, if they do not have evidence to back up their initial opinion.


In my experience, I am not seeing examples of Underquoting as defined. I am seeing examples of ESP’s being low but that is not underquoting. It is prudent, that people should therefore be mindful of the clear distinction about an Agent quoting below their ESP versus an Agent having a low ESP.


What other advice do you have for Agents?

There is no one size fits all approach when it comes to determining a reasonable, likely selling price for a property. The market is fluid – it has many external contributing factors that an Agent cannot control. It is therefore imperative that Agents are remaining as transparent as possible and ensuring that they are abiding by their obligations in the Act and the Property and Stock Agents Regulations 2022, which includes the Rules of Conduct. As Agent’s you must act honestly, fairly, and professionally with all parties to a transaction – this includes the Buyer. You cannot mislead or deceive a buyer in negotiations either. So, whilst your overarching obligations are to your Vendors and you must ensure you always act in their best interests whilst following their instructions, you still have an obligation to be honest, fair, and professional in your dealings with the buyer.

There is a lot more work to be done in this space and we will continue to work closely with the Regulator to advocate for necessary changes in this space.

Please do not hesitate to contact us to assist you in any way with your real estate agency’s legal and compliance needs.


Disclaimer: This is general advice only and cannot be relied upon as legal advice as it does not take into consideration your exact agency circumstances. This information is for guidance only.

Sarah Heuvel

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