Set out below are answers to the most common questions we have received from clients since the legislation was announced late last year.
FAQ’s on Underquoting Legislation
When does the legislation come into effect?
The legislation came into effect on 1 January 2016. It applies to all agency agreements entered into from 1 January 2016 or were in effect on 1 January 2016.
What happens to agency agreements that were entered into prior to 1 January 2016
The legislation applies to all agency agreements entered into prior to 1 January 2016 that are in force on 1 January 2016. For these properties the legislation requires that you update your estimated selling price.
You must also comply with all other requirements for advertising and making statements about your estimated selling price as it currently appears in the agency agreement, as well as all the new record keeping requirements. That means that if you have properties advertised for sale at a price that is less than the estimated selling price in your agency agreement, then you must take all reasonable steps, as soon as is practical, to change or withdraw those advertisements. This includes flyers and any other printed material and all online material.
What must I do when discussing price with a potential vendor?
While the legislation applies to properties that you have listed, it would be prudent that if you are going to talk about a possible selling price with a potential vendor, then you should undertake a CMA and have a record of how you obtained the expected price or price range that you are going to give to the prospect. Then, if the prospect decides to list with you, you have already complied with that part of the Act the requires that you have the evidence for your opinion. This evidence must be given to the vendor when they sign the agency agreement.
What restrictions are there in giving a potential vendor several price ranges based on different scenarios?
The Act specifies that the agent‘s estimate of selling price or price range must be reasonable. Because the agent must have evidence, Fair Trading in their underquoting Guidelines has set down the sort of evidence the agent needs to take into account when arriving at their reasonable estimate of selling price. SO the agent could take into account different scenarios and come up with slightly different estimates. However, keep in mind that if you are challenged at a later date you will have to prove that the estimate you gave the vendor was reasonable.
I have listed the property and I then find out some information that changes what I think the property will sell for?
As soon as you become aware of information that leads to you changing your opinion of likely selling price, you must redo your estimate and advise the vendor of the change. The legislation requires that you change the agency agreement and advise the vendor of the change and the reasons for it. This should be done in writing, which can be by letter or email.
How can I change the agency agreement? I have always been told I cannot change an agency agreement unless I have the original and the copy and the vendor agrees to the change
The legislation gives the agent the power to change the agency agreement by notifying the vendor in writing and given g them details of the reasons for the change.