REINSW president Malcolm Gunning welcomed the reforms, though added that they were a “knee-jerk reaction” to an election promise made during the boom.
“Underquoting is not rife, it’s just that the market has been selling stock at exceptionally high prices.”
Clearance rates hit a record high of almost 90 per cent in May, according to Domain Data.
The Minister for Better Regulation, Victor Dominello, initiated the reforms on the back of an election commitment in March by Premier Mike Baird.
Amendments to the Property Stock and Business Agents Act were passed by Parliament late on Tuesday night.
Under the new legislation, agents will be no longer be able to use open-ended guides using terms like “offers over” or “offers above”. Instead they will offer an estimated selling price or a range in which the highest figure is no more than 10 per cent of the minimum.
Agents will also be required to provide evidence of their estimated property value, and that advice needs to be written into their agency agreement.
The current $22,000 penalty for breaches will be extended to include the forfeiture of any commission or fees from the sale.
“Anything that makes the process more transparent for buyers and sellers is a good thing, and it’ll be good to see all agents on a level playing field,” said Piers van Hamburg, director of McGrath Lower North Shore. “The negative is you’ll get a few less published price guides because some agents will put it in the too-hard basket.
“A price range will also be perceived by vendors as putting a cap on their price hopes, psychologically, so vendors may not like it.”
Real Estate Institute of NSW president Malcolm Gunning said the industry welcomed the reforms, but added they were “a knee-jerk reaction to an election promise made at the height of the property boom”.
“There are still a few holes in these reforms,” Mr Gunning said. “Buyers are going to have to do more due diligence on their purchases because the agent will only be able to give advice on what they think the property is worth, not what the vendor might be willing to accept or what their reserve is likely to be at auction.”
Matt Hayson, director of Cobden & Hayson, said he would rather see the issue of improved agent qualifications addressed.
“At the moment, you have agents with only six months’ experience charging the same amount as an agent with more than 20 years’ experience,” Mr Hayson said.
“The transparency that’s needed is in the qualifications of the agent so you have tiered one, two and three agents who are able to charge accordingly.”
Ee Poh Ling, of Ee Real Estate, welcomed the changes, but said a lot of agents will stop auctioning property in preference of selling by private treaty.
“They can’t catch you for underquoting with private treaty,” Ms Ee said, “If you put a price on a property, that’s the price.”