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

The correct answer is This constitutes potential underquoting and may breach advertising standards. Option B correctly identifies this as potential underquoting, which breaches advertising standards under Australian Consumer Law and state legislation. The significant gap between the advertised price guide ($800,000-$850,000) and the reserve price ($920,000) constitutes misleading conduct. This practice is specifically prohibited as it creates false expectations for buyers and undermines market transparency. Real estate professionals must ensure price guides reasonably reflect the expected selling price to comply with consumer protection laws.

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

Underquoting is prohibited under Australian Consumer Law and state-specific legislation to protect consumers from misleading advertising. Price guides must reasonably reflect the expected selling price based on comparable sales, vendor expectations, and agent assessment. The gap between advertised price and reserve should not be excessive. Penalties for underquoting include fines, disciplinary action, and potential license sanctions. Each state has specific guidelines about acceptable price guide ranges and requirements for updating guides when circumstances change. This regulation ensures transparency and helps buyers make informed decisions about property purchases.

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

Remember FAIR: False Advertising Is Risky. When the price guide is significantly lower than the reserve, it's False advertising that creates legal Risk. Think of it like advertising a car for $10,000 but refusing to sell under $15,000 - it's misleading and unfair to buyers. When you see questions about price guides versus reserves, apply FAIR. If there's a significant gap making the advertising False, it creates legal Risk and breaches consumer protection standards.

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

Look for significant gaps between advertised price guides and reserves. A difference of $70,000+ typically indicates underquoting. Focus on consumer protection rather than immediate penalties like license suspension or auction cancellation.

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

An agent advertises a property with a price guide of $600,000-$650,000 to attract buyers to an open home. However, the vendor has set a reserve of $720,000 based on recent comparable sales. Multiple buyers attend inspections and prepare finance based on the lower guide, only to discover at auction that the property won't sell below $720,000. This wastes buyers' time and money, potentially causing them to miss other suitable properties. The agent faces penalties for underquoting and damage to their professional reputation.

Question

Property MarketingUnderquoting LegislationMEDIUM

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

Answer Options

A

The auction must be cancelled immediately

B

This constitutes potential underquoting and may breach advertising standards

C

The auctioneer's license may be suspended

D

The property can only be sold by private treaty