UNDERQUOTING… OUR THOUGHTS
We’ve heard a lot about underquoting in the press lately. The real estate industry is booming so it’s certainly a hot topic of late.. Sellers (and vendors’ agents) are ecstatic, as this period has seen sales records broken week after week. Buyers on the other hand, have experienced frustration and uncertainty due to the fact that they’ve either exceeded their budgets or have repeatedly missed out on their dream homes.
Victorian real estate laws govern the way agents are expected to deal with their clients. The sales authority form between a vendor and agent requires that the asking price (or estimate price range) for a property to be indicated prior to the commencement of a sales campaign. It’s my job to know the local market well enough and use my expertise to help the vendor arrive at an asking price that they’ll be happy with, and within a sales goal that’s realistic and achievable. After all, our main objective is the successful sale of the property!
In a nutshell – it’s illegal for agents to advertise or quote a figure to any prospective buyer (whether verbally or in writing) that’s below the amount indicated in the ‘vendor’s asking price’ section of the sales authority. This is what’s known as underquoting.
I’m going to look at it from my perspective, as an agent. When my services are appointed by a vendor (homeowner) to sell their house, my number one job is to sell the property at the best possible price, in line with sales trends in the market current at the time.. Now I’m not a believer in the blatant underquote (ie. the comparable sales for a certain property are circa $1,000,000 but we’ll quote $600,000 +) I think it’s completely deceptive, misleading and immoral, not to mention highly illegal. I like to sleep at night, so when I’m appraising a property for sale, I use the lower comparable sales figures in order to remain conservative and provide a realistic expectation for both the vendor and the buyer. .
Here’s the thing… Buyers are generally the ones complaining about underquoting and not getting a fair shot. They built this! If I were to quote a property with transparency and based on the higher comparable sales, then 9 times out of 10 I’m standing at my open house by myself. Shift it 10% lower and watch the magic begin… shift 30% and get ready for the weekend stampede! We are driven by bargains, sales and what looks attractive. If a lesser price is more attractive it gets more lookers, which leads on to strong competitive emotional, I need to win, offers which leads to big sale prices. If the price is quoted too high, well, no one likes wasting time (because it’s soooooo precious, for no actual reason, it’s just really precious) so nobody comes, which leads to price reductions, long time spent on market and basically ending up with just taking whatever offer comes by.
THE MISCONCEPTION… It is NOT underquoting if a reserve is met and 2+ buyers decide to take things to the next level! When a price is over reserve we, as agents, have done everything correctly and within the rules as long as that number has been written into authority and signed off by the homeowner. If certain buyers emotions believe paying hundreds of thousands of dollars more than an owner’s reserve price, then that’s their choice.
Things are changing and the laws are tightening. I look forward to the day of complete transparency.