A property is advertised with a price guide of '$800,000 - $850,000' but the reserve price is set at $920,000. What issue does this create?

Q: What is the correct answer to: A property is advertised with a price guide of '$800,000 - $850,000' but the reserve price is set at $920,000. What issue does this create?

The correct answer is This constitutes underquoting as the reserve exceeds the advertised range. Option B correctly identifies this as underquoting because the reserve price ($920,000) significantly exceeds the advertised price guide range ($800,000-$850,000). Under Australian Consumer Law and state legislation, this constitutes misleading conduct as the advertised range doesn't reflect the vendor's true price expectations. The substantial $70,000 gap between the upper guide and reserve demonstrates clear underquoting that misleads potential buyers about realistic pricing expectations.

Q: What background knowledge is needed for this Property Marketing question?

Underquoting regulations stem from Australian Consumer Law and state-specific legislation designed to prevent misleading property advertising. Key principles include: price guides must reasonably reflect vendor expectations; significant gaps between advertised ranges and reserves constitute underquoting; penalties apply for non-compliance. The practice became heavily regulated after widespread consumer complaints about properties selling well above advertised ranges. Reserve prices, vendor instructions, and comparable sales evidence help determine realistic price expectations. Real estate agents must ensure advertising accuracy and can face substantial penalties for underquoting violations.

Q: What is a good way to remember the answer to this Property Marketing question?

Remember RESERVE: 'Real Expectations Should Equal Reserve Values Exactly'. If the reserve price is significantly higher than your advertised range, you're likely underquoting. Think of it like advertising a car for $20,000 but refusing to sell for less than $25,000 - that's misleading regardless of calling it a 'guide'. When you see price guide questions, immediately compare the advertised range to any reserve price mentioned. If there's a significant gap (typically $50,000+ or 10%+), think 'RESERVE Reality Check' and identify it as potential underquoting.

Q: What exam tip applies to this Property Marketing question?

Look for significant gaps between advertised price ranges and reserve prices. Any substantial difference (usually $50,000+ or 10%+) typically indicates underquoting, regardless of vendor agreement or whether the property eventually sells within the advertised range.

Q: How does this Property Marketing concept apply in Australian real estate practice?

An agent advertises a family home with '$650,000-$700,000' but the vendor has set a $780,000 reserve and refuses offers below $750,000. Despite calling it a 'price guide', this misleads buyers who attend inspections expecting realistic pricing around $700,000. Buyers waste time, money on building inspections, and emotional investment on a property priced $80,000 above their expectations. The agent faces potential penalties and complaints to fair trading authorities for this underquoting practice.

Question

Property MarketingUnderquoting LegislationMEDIUM

A property is advertised with a price guide of '$800,000 - $850,000' but the reserve price is set at $920,000. What issue does this create?

Answer Options

A

The advertising is compliant as price guides are only estimates

B

This constitutes underquoting as the reserve exceeds the advertised range

C

The issue only arises if the property sells above $850,000

D

This is acceptable provided the vendor agrees to the advertising