Underquoting in real estate

With homes reaching record prices and rental waitlists growing longer by the day, it’s not an easy time for prospective home buyers.  

For many, the dream of owning a home seems out of reach, especially when the cost of entry into the property market is higher than ever before.  

And if those factors weren’t enough, there’s the additional challenge of an illegal practice called underquoting, which can make navigating the real estate landscape even more complex and frustrating.  

So, what is underquoting, and how is it affecting the property market? Let’s unpack this practice and better understand its impact, particularly for first-time homebuyers and renters.  

What is underquoting in real estate? 

Underquoting is an illegal act that some real estate agents practice to attract more buyers and, in turn, drive the selling price higher. 

This practice occurs when a property is advertised for a price lower than its valuation. If you’ve been at an auction and the price stalls within the reserve bracket but is ultimately passed in, this could be an indication of underquoting in action. 

Underquoting in real estate has become increasingly common in recent years, coinciding with the rise in the cost of living and the shift into a post-Covid world.  

In 2023, there were 1,375 reported instances of underquoting, which rose to 2,567 in 2024.

With insights from Tom Keel and Chia-Lung Tai from the Faculty of Business and Law, we’ll explore how underquoting works, what regulations exist, and what you can do if you’re faced with a case of underquoting.

Why do real estate agents underquote?

To understand why underquoting has become such a common practice in real estate, it’s important to first understand the role of the real estate agent.  

Real estate agents help people buy, sell and rent properties, and a significant part of their job involves attracting buyers and sellers. 

Real estate agents build up their database of buyers and sellers by running open houses and collecting the contact details of interested parties.

So, how can real estate agents attract more prospective buyers and get more people through the door? Advertising the home at a lower price point – AKA, underquoting.

Tom Keel, who specializes in property and real estate, explains the reasoning behind this approach.

‘The old saying is, ‘“Quote it low and watch it go, quote it high and watch it die.”’

‘Underquoting draws in a larger pool of potential buyers, which looks positive to the vendor, reflects well on the agent’s marketing, and can create a competitive vibe around the sale.’

Keel explains that many of the potential buyers that emerge may not actually be in the financial position to buy the property, but their presence is usually justification that the underquoted price has worked to generate interest.  

‘No agent wants a vendor to look out at an auction crowd and see very small numbers of buyers,’ Keel notes. 

What are the legal ramifications of underquoting in Australia?

After years of watching house prices soar and the cost-of-living increase, many Australians – particularly young people – have lost hope of ever purchasing their own home. What most potential buyers don’t know is that chronic underquoting by some real estate agents is contributing to this dire landscape.  

Fortunately, there are regulations in place to deter real estate agents from engaging in underquoting.

In 2016, the Victorian Parliament passed the Estate Agents Amendment (Underquoting) Act 2016 (Vic), which amended the Estate Agents Act 1980 (Vic). The legislation introduced a series of new provisions designed to ensure that real estate agents provide accurate and reasonable price estimates to both sellers and buyers.  

Chia-Lung Tai from the Deakin Law School explains that the legislation requires agents to give the vendor an ‘estimated‘ selling price, either as a single amount or as a price range of no more than 10% apart (S47A(1)(a)).  

There is also a requirement that the estimate provided to the vendor ‘must be reasonable’. Specific directions on how this estimate should be obtained are stipulated under Section 47AC. 

Additionally, section 47AF of the Estate Agents Act requires the selling agent to publish a ‘Statement of Information’, for all prospective purchasers to have access to. Tai explains that the mechanism that prevents underquoting is under Section 47AF. The section specifically outlines that an estate agent cannot publish an estimate in the Statement of Information that is lower than what the estate agent had estimated to the seller under Section 47A.  

As Tai clarifies, ‘in other words, an estate agent cannot quote a higher estimate to the seller to entice them into entering a contract with the agent, while quoting a lower figure in the advertisement or to potential buyers to lure them into becoming interested in the purchasing of the property.’ 

The guidelines state that if any of these provisions are breached, the agent is then liable for ‘200 penalty units worth of penalties. As of the 2024-2025 financial year, the Victorian Treasury department has set each penalty unit at $197.59, meaning the maximum fine to the offending agent is currently $39,518.

How to report underquoting in real estate

As home buyers are essentially consumers, suspected instances of underquoting in real estate can be reported to the Consumers Affairs Victoria through a specific web form.

There has been a noticeable rise in underquoting complaints made over the last year. Consumer Affairs recorded around 1,500 complaints in 2023 and 2,567 complaints in 2024. 

Keel suggests that there are two factors contributing to the rise in reported instances of underquoting.

‘Firstly, clearance rates of late have dropped, and underquoting brings more potential buyers to a property, which can help achieve sales,’ says Keel. ‘Secondly, agents may be expecting a downturn in the market and have quoted according to that. Then they appear to have underquoted when a higher-than-expected sales price occurs – even though they believe they quoted accurately,’ says Keel.

A final word on underquoting in real estate 

While underquoting has become a prevalent issue in real estate, efforts from Consumer Affairs and governing bodies are working to address this problem. The regulations put in place aim to promote transparency and fairness in the market, ensuring that buyers and sellers alike are provided with accurate and honest price estimates.