Underquoting, the illegal practice of deliberately listing a property for less than its estimated value to attract more potential buyers, remains a systemic issue in the Australian property market, with Victorian agents employing a range of unethical tricks to circumvent the law. These practices contravene the Victorian Estate Agents Act 1980 and related professional conduct regulations.
One common tactic involves manipulating the paper trail to justify a low advertised price. Agents have admitted to avoiding putting an appraisal price in writing initially. This prevents consumer watchdogs from questioning the significant discrepancy when a higher appraisal price (e.g., $2.2 million) is later followed by a much lower advertised auction guide (e.g., $1.8 million to $1.9 million). The Estate Agents Act 1980 requires an agent’s estimated selling price to be reasonable (s. 47AB) and documented in the sales authority, and the Statement of Information (SOI) must reflect an indicative selling price not less than this estimate (s. 47AF).
Another key strategy is refusing to accept offers before an auction. Under law, if an agent rejects a genuine written offer on a property, they must increase the advertised price guide if it is lower than the rejected offer. Agents skirt this rule by formalising written agreements with vendors that stipulate no pre-auction offers will be received, or they may deliberately delay or allow offers to lapse, creating a “smokescreen of underquoting”. However, unless the seller has instructed otherwise in writing, an agent must communicate all offers to the principal as soon as possible (Regulation 16). If a written offer is rejected because it is too low, the agent is obliged to update the indicative selling price and any lower advertised price.
The presentation of comparable property sales is also frequently misused. Agents are accused of employing “bogus” or “cherry-picked” comparable sales, often selecting inferior properties to justify a low price guide. In some cases, agents have omitted the comparable sales section entirely, claiming there are none. Victorian underquoting laws, administered by Consumer Affairs Victoria, require the Statement of Information to include details of the three most comparable properties and state that agents must use all data they have, including undisclosed sales, when selecting these comparables.
Furthermore, agents have been known to encourage vendors to sign contracts with an incorrect estimated sales price to legally justify a lower advertised price, explaining that the low price is “just to get the buyers through the door” and build competition. This practice of building competition and pressure on buyers has led to homes selling for substantial amounts above the advertised guide.
Finally, after a successful auction, one reported practice to avoid scrutiny and consumer affairs reports is to delete the Statement of Information, with its original price estimate, from the online listing.
Estate agents and their representatives are legally required to act fairly, honestly, and in good faith (Regulation 10), and to always act in a principal’s best interests (Regulation 11). Agents who fail to comply with underquoting laws risk penalties exceeding $36,000, and for more serious offences, they may also forfeit any commission received from the sale.