Underquoting explained — why the guide price isn’t the sale price in NSW and Victoria

The short version

Underquoting is advertising or quoting a price for a property that is lower than the seller will actually accept, or lower than the agent's own estimate of what it will fetch. It's used to pull a bigger crowd to an inspection or auction — more competition, a higher final price. It is against the law in both NSW and Victoria, but it's hard to police, so a wide gap between the guide and the sale price is common. The practical lesson for a buyer isn't to trust the quote — it's to work out the property's likely value yourself before you spend money on inspections and a contract review.

Why the guide and the sale price differ so often

Some of the gap is honest. In a rising market a home can genuinely sell above what a reasonable estimate was a few weeks earlier, and an auction can run past everyone's expectations when two determined bidders meet. A guide is an estimate, not a promise. But part of the gap can also be underquoting: a low number advertised to draw buyers who then feel invested — they've paid for a building and pest report, taken time off, fallen for the place — and keep bidding well past the quote. The trouble for you is that from the outside the two causes look identical.

The rules in New South Wales

Under the Property and Stock Agents Act 2002 (NSW), an agent must record a reasonable estimate of the property's likely selling price in the agency agreement with the seller, and must be able to back it with evidence such as comparable sales. It is illegal to advertise or tell a buyer a price that is less than that estimate, or less than an offer the seller has already rejected in writing. A price guide can be a single figure or a range — but where a range is used, the top figure can be no more than 10% above the bottom. NSW Fair Trading investigates underquoting complaints, and an agent found to have underquoted can be fined and made to forfeit the commission on that sale.

The rules in Victoria

Victoria's underquoting laws sit in the Estate Agents Act 1980 (Vic), and they add a document you should always ask for: the Statement of Information. For a residential sale the agent must prepare one, and it has to show an indicative selling price (a single figure or a range whose top is no more than 10% above the bottom), the median sale price for the suburb, and three comparable property sales. It must be displayed at every inspection, included in online advertising, and given to you within two business days if you ask. It is illegal to advertise a price below the indicative price, below the agent's estimate, or below a written offer the seller has already rejected. Consumer Affairs Victoria enforces this and publishes an inspected-properties list of agents caught out.

How to spot it — and what to do instead

You can't prove underquoting from the outside, but you can protect yourself from it. In Victoria, read the Statement of Information: if the three comparable sales all sit well above the quoted range, treat the quote with suspicion. In both states, look up recent sales of genuinely similar homes yourself rather than anchoring on the agent's number, and ask the agent what those properties sold for and whether any offer has already been rejected. The point isn't to catch anyone out — it's so you set your own limit from the evidence, not from a figure designed to get you in the door.

What to check before you sign

1. In Victoria, get the Statement of Information and read the three comparable sales against the quoted range — a big gap is a warning sign.
2. Do your own comparable-sales homework for the suburb, so the agent's guide isn't the only number in your head.
3. Ask the agent what similar homes have sold for, and whether any offer has already been made and rejected.
4. Set your maximum from the evidence, in writing, before auction day — and don't let the room or a low quote pull it upward.
5. Budget your inspections and review around the likely price, not the quote, so you're not spending on a property that was never in your range.
6. Keep the quote and any advertising; if it turns out to have been well below the sale price, you can report it to the regulator afterwards.

Common questions

Is underquoting illegal, or just unfair?

It's illegal in both NSW and Victoria, and regulators do fine agents and strip commissions for it. The difficulty is proof — a genuinely hot auction and a deliberate low quote can produce the same result, so many gaps are never pursued. That's why buyers are better served by their own valuation homework than by relying on the rules to hold the line.

Does the guide price bind the seller at auction?

No. The guide is marketing, not the seller's floor. The seller sets a confidential reserve, and the property is only "on the market" once bidding reaches it. If bidding stalls below the reserve the property is passed in. The guide can sit well below the reserve, and nothing forces the two to match.

Should I bother inspecting a property quoted below my budget?

Be careful. A low quote can attract you to a home that will actually sell above your limit, and the money you spend on a building and pest inspection and a contract review is gone whether or not you win. Sanity-check the likely price against comparable sales before you commit to the cost of due diligence.

Does underquoting happen in private-treaty sales too?

Yes — the rules cover advertised prices generally, not just auctions. But the pressure is greatest at auction, where the crowd and the lack of a cooling-off period reward a low quote that fills the room. Either way, your defence is the same: value the property yourself and let that, not the guide, set your number.