Underquoting
Consumer Affairs Victoria “Underquoting”
Underquoting can occur when a property is advertised at a price that:
- is less than the estimated selling price
- is less than the seller’s asking price
- has already been rejected by the seller.
Under Victoria’s underquoting laws, estate agents and agents’ representatives have obligations relating to:
- the estimated selling price
- comparable property sales
- a Statement of Information for prospective buyers, and
- advertising prices, terms and symbols.
These laws complement the false and misleading representation provisions of the Australian Consumer Law (ACL). For more about the ACL provisions, see Advertising and representations.
The underquoting laws apply to residential property sales
This practice by real estate agents was meant to be fixed by underquoting legislation.
A misleading practice is to not increase the marketed price of a home after receiving an offer higher than the lower marketed price.
For example: A home has a marketed price of “500 – 550”
The Agent receives an unconditional (no conditions such as finance, building or pest) offer at $520,000. The settlement time agrees with the settlement time desired by the seller and quoted by the agent.
The marketed price should change to $520,000 – $550,000 but how often does it?
Underquoting. Is it really underquoting?
We bid at two auctions on the weekend and the price guide wasn’t even close.
We were told by one of the big brand agents that offers would need to be 5 to 10% higher than the top of any quote range.
Thus, a home quoted at $725,000 – $785,000, the price expectation would be from $824,250 to $863,500. This home was on the market (the sellers reserve was met) at $860,000 and sold for $1,000,000. $860,000 being just short of the additional 10% of $863,500.
There were many bids, multiple buyers.
The real estate adage “quote them low, watch them go, quote them high, watch them die” was definitely happening here.
The lower the price the more buyers will view the home.
Buyers become accustomed to this sort of thinking BY AGENTS.
If agents all quoted correctly then this excuse would no longer wash.
They cite “everybody does it, you know how it goes” is ridiculous.
Underquoting laws were meant to fix this. They haven’t.
In the above scenario, market forces pushed the price up, genuine competition above the sellers reserve. A quote range that included the Sellers reserve would be more like $817,000 to $857,850, or $810,000 to $890,000. This competition would probably achieve the same result.
We used to say (early days of real estate) that a keen buyer would spend an extra 10-15% if they really wanted a house.
A quote price of $810,000 to $890,000 could attract $1,000,000 under competition. It is feasible.
But if agents did this, then they couldn’t boast about how much over expectation they managed to secure for their seller.
If agents did the right thing, then buyers wouldn’t waste their time, money, and energy on building and pest inspections, conveyancer consultations etc. Buyers in the marketed price bracket could expect a selling price around $785,000. That would be fair, and conscionable.
Not all agents use this underhanded technique which makes it even harder for buyers to know where to aim. My recommendation: do your own research regarding home pricing, and also do the research on the local agents. The ones who regularly underquote by large amounts will soon be spotted.
Underquoting: declaring a low Reserve Price?
I spotted a home going to auction this weekend with a quoted Reserve Price.
https://www.realestate.com.au/property-house-vic-mill+park-148426408?
The Statement of Information mentions 3 properties, all above the quoted Reserve Price
As a buyer, try researching each home mentioned on the Statement of Information.
Do they compare to the home going to auction with a quoted Reserve Price?
Real estate agents say the market understands how they quote low.
Buyers say that agents are misleading
Buyers change their expectations.
Real estate agents continue to “quote them low”
How can we fix this?
