A vendor instructs their agent to set a reserve price of $1.2 million but wants the property advertised as 'Auction - Price Guide $950,000+'. The agent has recent comparable sales between $1.15-1.25 million. What should the agent do?

Q: What is the correct answer to: A vendor instructs their agent to set a reserve price of $1.2 million but wants the property advertised as 'Auction - Price Guide $950,000+'. The agent has recent comparable sales between $1.15-1.25 million. What should the agent do?

The correct answer is Advise the vendor this constitutes underquoting and adjust the price guide accordingly. Option C is correct because agents have a legal obligation under state legislation and Australian Consumer Law to prevent underquoting. The significant gap between the $950,000+ price guide and the $1.2 million reserve, combined with comparable sales of $1.15-1.25 million, clearly constitutes underquoting. The agent must educate the vendor about these legal requirements and adjust the advertising to reflect realistic price expectations. Professional standards require agents to refuse participation in misleading advertising practices, regardless of vendor instructions.

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

Underquoting regulations in Australian real estate prohibit advertising properties at prices significantly below the reserve or realistic market value. State legislation and Australian Consumer Law require agents to provide accurate price guidance based on comparable sales evidence and vendor expectations. Agents have professional obligations that override client instructions when legal compliance is at issue. The regulations aim to protect consumers from misleading advertising and ensure market transparency. Penalties for underquoting can include fines and disciplinary action. Agents must balance client service with regulatory compliance and ethical practice standards.

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

P-Professional duty comes first, R-Reserve price must align, I-Investigate comparables, C-Consumer protection laws apply, E-Educate the vendor. Remember: 'Agents must check the PRICE before advertising' - professional obligations and consumer protection always override vendor preferences when pricing guidance is involved. When you see pricing/advertising questions, run through PRICE: check if professional duties conflict with instructions, verify reserve alignment, consider comparable evidence, remember consumer laws, and focus on education rather than refusal or blind compliance.

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

Look for significant gaps between advertised price guides and reserves/comparables. When vendor instructions conflict with legal requirements, the answer involves education and adjustment, not blind compliance or relationship termination.

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

An agent receives a listing where the vendor wants to advertise their property at $800,000+ to attract more buyers, but has set a reserve of $950,000 and recent sales show similar properties selling for $920,000-980,000. The agent must explain underquoting regulations, show the vendor how the proposed advertising breaches consumer protection laws, and negotiate a realistic price guide of $920,000+ or similar that reflects both the reserve and market evidence. This protects both the vendor from potential penalties and buyers from misleading information.

Question

Property MarketingUnderquoting LegislationHARD

A vendor instructs their agent to set a reserve price of $1.2 million but wants the property advertised as 'Auction - Price Guide $950,000+'. The agent has recent comparable sales between $1.15-1.25 million. What should the agent do?

Answer Options

A

Follow the vendor's instructions as they own the property

B

Refuse the listing and recommend the vendor use another agent

C

Advise the vendor this constitutes underquoting and adjust the price guide accordingly

D

Advertise as requested but include a disclaimer about price expectations