Danny Doff and Caleb Jarvis of Laing & Simmons Double Bay have openly shared with prospective buyers of a Bondi semi, the $1.7 million price estimate on the agency agreement.

Doff said, “We were getting to a stage where we’d see that buyers just don’t believe what we’re quoting. And there’s been a lot of talk about underquoting. So we thought the best way to get around it was to tell buyers what we’ve actually put on the agency agreement.”

The property was sold prior to auction for just higher than the price estimate.

The agency agreement is the contract between the agent and the seller, and includes an estimate of the property’s selling price. The estimated price is calculated by comparing the property with similar properties that have sold in the area.

Underquoting is the term given to the common practise of quoting to prospective buyers a figure lower than the estimated selling price. This can lead to interested buyers wasting time and money on inspections, reports and attending auctions, and perhaps even buying a property they can’t really afford.

It is a common misconception that underquoting occurs when a property is advertised for a price, but sells for more. This is not the case, because prices are dictated by market forces. But if a property is advertised for a price that is significantly lower than the price the seller and the agent have estimated is achievable, then that does qualify as underquoting.

"It’s the old-school thought that you have to quote low to get people through, but by quoting low you’re actually wasting people’s time. You're not being up front with them,” said Doff.

"Buyers are quite smart. They know what’s going on. When you’re talking to a buyer who has say $1.7m to spend, they’re quite an expert at that price range. They’re looking at every single property in that price range. So they actually know straight away that the agent’s underquoting."

The NSW Government is introducing reforms that address underquoting and provide clarity for buyers, agents and sellers. The reforms are designed to prevent properties being underquoted.

"What we’re doing is creating more transparency, and we urge other agencies to do it as well,” said Doff.

He encourages prospective property buyers to ask agents what price they’re putting on the agency agreement. "A simple way to crack down on undergoing is getting the consumer to ask the agent, 'What did you tell the owners? What did you put on the agency agreement?'"