An agent advertises a property with a price guide of '$800,000-$850,000' but the vendor's reserve is $920,000. What issue does this create?

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 $920,000. What issue does this create?

The correct answer is The agent may be breaching underquoting legislation. Option A is correct because this scenario constitutes a clear breach of underquoting legislation. Most Australian states prohibit agents from advertising properties at prices that don't reasonably reflect the vendor's genuine selling expectations. With the advertised range being $70,000-$120,000 below the reserve price, this creates a substantial gap that misleads buyers about the property's true market value. Underquoting legislation specifically targets this practice to protect consumers and ensure transparent marketing.

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

Underquoting legislation exists in most Australian states to protect consumers from deceptive property marketing. It requires agents to advertise properties at prices that reasonably reflect the vendor's genuine selling expectations, including reserve prices. The legislation typically defines underquoting as advertising below the vendor's price expectations by a specified amount or percentage. Penalties can include fines, license suspension, and disciplinary action. The law aims to ensure market transparency, prevent buyer disappointment, and maintain industry integrity. Agents must regularly review and update their marketing to reflect current vendor expectations and market conditions.

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

Remember FAIR: False Advertising Is Risky. When the advertised price is significantly below the vendor's reserve, it's like advertising a Ferrari for the price of a Ford - it's misleading and illegal. The price guide should fairly represent what the vendor actually expects to receive. When you see questions about price guides versus reserves, think FAIR. If there's a significant gap between advertised price and vendor expectations, it's likely underquoting. Look for the option that mentions breaching advertising or underquoting legislation.

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

Look for significant gaps between advertised prices and vendor reserves/expectations. If the advertised price is substantially lower than what the vendor actually wants, it's typically underquoting. Focus on consumer protection and advertising standards rather than auction procedures or commission calculations.

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

An agent lists a property in a sought-after suburb with a price guide of '$1.2-1.3 million' to attract more buyers to the auction. However, the vendor has privately told the agent they won't sell for less than $1.5 million and set their reserve accordingly. On auction day, bidding stalls at $1.35 million and the property passes in, disappointing genuine buyers who attended based on the misleading price guide. The agent faces investigation for underquoting and potential penalties including fines and license sanctions.

Question

Property MarketingUnderquoting LegislationMEDIUM

An agent advertises a property with a price guide of '$800,000-$850,000' but the vendor's reserve is $920,000. What issue does this create?

Answer Options

A

The agent may be breaching underquoting legislation

B

The vendor must reduce their reserve to match the advertising

C

The property cannot be sold at auction

D

The agent's commission will be calculated incorrectly