The risks of blind/price searches: Are you accidentally underquoting on online platforms?

O*NO! Recently, we've been seeing more and more agents stumbling into issues with underquoting offenses on online property platforms. This often has to do with the data they use for the backend of these platforms, especially in sections like 'blind price' or 'search price.' Lately, Consumer Affairs Victoria (CAV) has been coming down hard on agents, but it wouldn't be surprising if other jurisdictions start doing the same.

Like most agents, you may be thinking you’re safe from underquoting breaches because blind price or search price inputs are hidden from consumers. Well, not according to CAV. So, lets take a look at how your blind/search pricing and backend practices could be breaching underquoting laws, and how you can avoid these risks.

What is underquoting?

Underquoting, in Australia, refers to the practice of marketing a property for sale at a price that is lower than the agent's estimated selling price, the seller's asking price, or a price that the seller has previously rejected.

Each state and territory has its own set of laws and regulations regarding quoting. For example, in NSW, according to the Property Stock and Business Agents Act 2002, agents are not allowed to give clients vague or underestimated prices for properties.

In Victoria, agents also have an obligation regarding the estimated selling price they provide, namely that the estimate be reasonable and consider the sale prices of three comparable properties. Under s 47A of the Estate Agents Act, In Victoria, when you estimate the selling price property for sale, which you will then use to advertise it, you can either advertise the price as a single figure, or a price range, where the difference between the lower and upper limit should not be more than 10 percent of the lower limit amount. As an example, if the lower limit of a price range is $1,000. According to the rule, the upper limit can't exceed $1,100 (10 percent of $1,000). So, the price range would be $1,000 to $1,100.

A brief overview of what constitutes underquoting in the different states and territories can be found here.  

What is blind pricing or search pricing on online real estate website?

On online platforms like Domain and realestate.com.au, you can input two price ranges: one visible to consumers, called the outward price, and another hidden in the platform's backend, known as the blind price range, which helps categorise your property accurately for price-restricted searches. You have the flexibility to set a different price range for the backend compared to the amount displayed on the ad.

So for example, let’s say you are selling a property for $10,000. Then, realestate.com.au, under their own rules, allows you to select a backend price range that is 10% lower and 10% higher than this amount (so $9000 - $11,000). This means when a customer puts in a search filters with minimum $9,000 and maximum $15,000 – your property will pop up. Each platform will most likely have their own rules regarding this.

How am I underquoting on online real estate platforms?

As real estate professionals, we're well aware of the incredible power of online platforms such as Domain and realestate.com.au in effortlessly connecting buyers with sellers and offering invaluable market insights to streamline property transactions. However, the hidden backend parts are now landing many with hefty fines and disciplinary action. So let’s break down how and why this can happen.

 Now, here's where the problems arise: Does that hidden price range, the one customers don't see, have to comply with underquoting regulations?

 First off, let's consult Section 47A of the Estate Agents Act. Spoiler alert: It doesn't provide a clear-cut answer. However, recent crackdowns by Consumer Affairs Victoria (CAV) suggest that this loophole isn't exactly a safe haven for agents. According to CAV, the price range entered into the platform's backend must adhere to underquoting regulations. Translation: Keep the difference between the lower and upper limits within 10 percent of the lower limit amount. Fail to comply, and you could find yourself facing hefty fines.

Now, you might be wondering, how does this murky territory work exactly? Well, welcome to the land of legal inference. In this game, we're left to connect the dots without a roadmap. Enter Section 47C, where agents commit an offense if they feed prospective buyers false representations about the selling price. This includes providing a price lower than the actual figure or, if it's within a range, less than the lower limit of that range.

Picture this: You set a price range in the backend or use one in your ad, but it doesn't quite align with the 10% rule. You might justify this by arguing that consumers won't see this hidden range anyway. But here's the twist: Even though it's hidden from view, this price range could still influence buyers' perceptions. Imagine a buyer diligently using price filters on the website, expecting to snag a deal within a certain range. Lo and behold, your property pops up, seemingly within their budget. You may argue that the listed price is right, but buyers might think differently, especially if they feel misled by their filtering expectations.

You can also be caught by the ACCC and consumer laws for misleading and deceptive conduct. Let’s look at it this way – if the range or figure you put into the backend isn’t accurate, then you may be misleading or deceiving potential buyers by underquoting under the real estate laws. For example, let’s say a buyer is looking for houses in their price range of around the 500K mark, so they use the price search filters, but then your property, priced at $700K pop’s ups, this could cause the buyer to potentially be misled, right?

How can I avoid accidental underquoting?

Get Your Ranges Right: The foundation of compliance is accuracy. When inputting price ranges in the platform's backend, make sure they're in line with the underquoting rules in your state/territory. So, for example, if you’re in Victoria, stick to the 10% rule, and With the lower limit of the price ensure it is not lower than the actual selling price, or if a range, than the lower limit of the sale price range.

Familiarise Yourself with the Law/Regulations: Don't solely rely on online advertising platforms for guidance. While these platforms are widely used in the industry, mistakes can happen, especially in areas where rules are unclear. Take the time to wrap your head around the specific laws and regulations in your state or territory. When in doubt, don't hesitate to reach out to legal experts or your regulatory authority (eg. CAV for Vic) for some clarity.

Educate Your Staff: Knowledge is power. Establish a comprehensive policy outlining the correct procedures for setting price ranges, both customer-facing and in the backend. Get everyone on the same page through training sessions that drill home the importance of accurate pricing and the dire consequences of underquoting.

Regular Audits: Proactive monitoring is key to staying ahead of potential compliance issues. Set up a routine for regular audits to make sure your team is toeing the line with underquoting rules in their ads. Whether it's weekly, bi-weekly, or monthly, consistency is key. These audits help identify any discrepancies or errors and provide an opportunity to correct them promptly. Additionally, establish a reporting system where staff can raise concerns or seek clarification on setting price ranges.

Key Takeaways:

•  Underquoting in Australia is considered deceptive and misleading, and in most cases will land you with a hefty fine and regulatory issues.

• Online platforms like Domain and realestate.com.au allow you to input two price ranges: one visible to consumers and another hidden in the platform's backend, which helps categorise your property accurately for price-restricted searches.

• Even though hidden from consumers, according to CAV, the price range entered into the platform's backend must adhere to underquoting rules.

• If you set a price range in the backend or feature it in your ad, but if it doesn't quite follow the quoting rules it could still influence buyers' perceptions, potentially leading to misunderstandings about the property's affordability when using price filters on the website.

• By understanding the underquoting rules and making sure everyone in your team follows them, you can run ensure smoother operations, without the fear of regulatory bodies, disciplinary action, and massive fines.

Your Next Steps

Are your quoting practices up to scratch? Whether you need clarification on your legal obligations, training for your team, or help with building policies to guide your agency – we’ve got you covered.
Book your free call see how we can help steer you towards compliance.

Boring legal stuff: This article is general information only and cannot be regarded as legal, financial or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us. PS - congratulations if you have read this far, you must love legal disclaimers or are a sucker for punishment.