A vendor instructs an agent to set a reserve price of $1.2 million but continue advertising the property with a guide of '$900,000+'. The agent knows recent comparable sales support a value around $950,000. What should the agent do?

Q: What is the correct answer to: A vendor instructs an agent to set a reserve price of $1.2 million but continue advertising the property with a guide of '$900,000+'. The agent knows recent comparable sales support a value around $950,000. What should the agent do?

The correct answer is Advise the vendor about underquoting risks and adjust the price guide accordingly. Option C is correct because agents have professional obligations under Australian Consumer Law and state underquoting legislation that override client instructions when they conflict with legal requirements. The agent must advise the vendor about the risks of misleading advertising and underquoting penalties, then adjust the price guide to reflect realistic market expectations based on the $950,000 comparable sales. This protects both parties from legal consequences while maintaining professional standards.

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

Underquoting legislation varies by state but generally prohibits advertising properties at prices significantly below genuine selling expectations. Australian Consumer Law Section 18 prohibits misleading and deceptive conduct in trade or commerce. Real estate agents must ensure price guides reflect realistic market values based on comparable sales, vendor expectations, and market conditions. Penalties for underquoting include fines and potential license sanctions. Agents have professional duties that override client instructions when compliance with legislation is at stake. The price guide should typically be within 10% of expected selling price, though specific thresholds vary by jurisdiction.

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

Remember 'LEGAL before LOYAL' - Legal obligations always come before client loyalty. When client instructions conflict with legislation, professional duties require choosing Legal compliance over client Loyalty. Think of it as being a 'Legal Guardian' for your client, protecting them from their own potentially harmful decisions. When you see questions about conflicting client instructions and legal requirements, immediately think 'LEGAL before LOYAL' and choose the option that prioritizes legal compliance while educating the client about the risks.

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

Look for scenarios where client instructions conflict with legislation. The correct answer will always involve educating the client about legal risks and adjusting the approach to comply with the law, rather than blindly following instructions or taking extreme action.

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

A vendor inherited a property and believes it's worth $2 million based on outdated valuations, instructing the agent to advertise at '$1.5 million+' with a $2 million reserve. Recent comparable sales show values around $1.6 million. The agent must explain underquoting risks, show current market evidence, and adjust the price guide to '$1.5-1.65 million' or similar realistic range. This protects the vendor from penalties while setting appropriate buyer expectations and maintaining professional integrity.

Question

Property MarketingUnderquoting_legislationHARD

A vendor instructs an agent to set a reserve price of $1.2 million but continue advertising the property with a guide of '$900,000+'. The agent knows recent comparable sales support a value around $950,000. What should the agent do?

Answer Options

A

Follow the vendor's instructions as they are the client

B

Refuse to continue marketing and terminate the agency agreement

C

Advise the vendor about underquoting risks and adjust the price guide accordingly

D

Continue with current advertising but inform buyers privately about the higher reserve