An agent advertises a property with a price guide of '$800,000 - $850,000' but the vendor's reserve is $900,000. What is this practice called?

Q: What is the correct answer to: An agent advertises a property with a price guide of '$800,000 - $850,000' but the vendor's reserve is $900,000. What is this practice called?

The correct answer is Underquoting. Underquoting occurs when an agent advertises a property at a price significantly below the vendor's actual reserve price or realistic selling expectations. In this scenario, the advertised price guide of $800,000-$850,000 is substantially lower than the vendor's reserve of $900,000, creating a gap of at least $50,000. This practice misleads potential buyers about the true price expectations and is prohibited under Australian consumer protection laws in most states.

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

Underquoting is prohibited under Australian Consumer Law and state legislation as misleading and deceptive conduct. It occurs when advertised prices fall significantly below vendor reserves or realistic selling expectations. Most states require price guides to be within 10% of the vendor's realistic selling range. Penalties include fines, license suspension, and compensation orders. The practice wastes buyers' time, distorts market data, and creates unfair competitive advantages. Real estate agents must ensure advertised prices reflect genuine vendor expectations based on current market evidence and comparable sales data.

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

Remember 'UNDER the Reserve = UNDERquoting' - when the advertised price is under the vendor's actual reserve, it's always underquoting regardless of marketing strategy claims. When you see a significant gap between advertised price and vendor expectations in exam questions, immediately think 'UNDER' - if the advertised price is substantially under the reserve, it's underquoting.

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

Always compare the advertised price range with the vendor's reserve. If there's a significant gap below the reserve, it's underquoting.

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

An agent lists a renovated family home with a price guide of '$650,000-$700,000' to attract maximum buyer interest, knowing the vendor won't accept less than $780,000. Multiple families attend inspections believing the property is within their budget, waste time on due diligence, and feel deceived when the property sells well above the advertised range. The agent faces regulatory investigation and potential penalties for underquoting, while the agency's reputation suffers from negative buyer feedback and media attention.

Question

Property MarketingUnderquoting_legislationMEDIUM

An agent advertises a property with a price guide of '$800,000 - $850,000' but the vendor's reserve is $900,000. What is this practice called?

Answer Options

A

Market positioning

B

Underquoting

C

Price bracketing

D

Strategic pricing