Underquoting and it’s excesses are hopefully behind us with Consumer Affairs having introduced new regulations which commenced on May 1 2017. Certainly, market forces and conditions alone will still shape the outcome of certain home sales. However, the new measures will force Real Estate Agents to greatly sharpen quoted values.
Underquoting had to go
Consumer Affairs had to make a move on underquoting. It was manipulative. For some real estate companies it has been standard operating procedure. Those agents would argue underquoting isn’t simply misinformation, because buyers are well researched. They have everything at their disposal on the internet and should expect a typical competitive auction process to push a sale price higher than what’s been quoted. But the reality is it’s not only unfair to buyers but also to other agents. An agent who is underquoting a property has the potential to pull buyers away from another property that has been quoted correctly. Then these buyers see themselves blown out of the water at the auction of the underquoted property.
Underquoting in a moving market
At times though agents can be stuck between a rock and a hard place. In a moving market it can be a challenge to nail an exact value and avoid underquoting. Many weekends have produced auctions where reserves have been smashed by more than 10%. Did underquoting apply here? Or is it just a rising market? When buyers are in the habit of paying up to 20-30% over the odds in a rising market, quoting a property accurately is tricky.
For example, if a $1M dollar property is quoted as such, many buyers would just simply add 20-30% to the price expecting to pay $1.2-$1.3M and say it’s not worth it. This is commonly known in agent circles where the campaign has been “cooked”. Therefore this is the reason why some agents would be forced to quote the property at $750,000+ to bring up the expected perceived value of up-to $1M.
Real Estate Portals price increments can play a part in underquoting.
Another area muddying the water with underquoting is how leading property websites structure their price search criteria. The price increments real estate websites use don’t make it easy for Real Estate Agents to quote accurately. For example on Realestate.com.au’s search above $1M, the price stepping goes up in $250K increments. Above $2M it goes up in $500K increments. And above $3M it goes up in $1M increments. Therefore, if a buyer has $3.5M to spend on a property they have to key in $4M as a max price. No real estate agent wants to slot a property in a higher search/price category just by default.
The new rules mean tighter quoting to eliminate underquoting
So what do the new rules require? A Statement of Information must accompany all online advertising and will also be displayed at open for inspections. This is similar to how a Disclosure Statement must be displayed currently.
The Statement of Information which covers Sections 47AF of the Estate Agents Act 1980 includes:
• The Indicative Selling Price stated as a single figure or within a 10% range.
• A median sale price for the suburb also has to be included. Median estimates can differ, depending on the source. The source of the estimate must be indicated.
• Also, 3 comparable property sale examples must be provided, from within a 2 km radius and 6 month period.
Vendor Marketing has always set the bar for accurate quoting
Quoting has always been of paramount importance with Vendor Marketing’s process. Vendor Marketing has been providing sale price quotes vendors can truly rely on right from the get-go. Our process includes a ’worst-case to best-case’ scenario ensuring Real Estate Agent’s accuracy in the valuations they supply for us, when we invite them to compete for your property sale. And the recent comparable local property sale details we also require from each agent further completes the picture.
Vendor Marketing – Melbourne’s most qualified vendor advocates, offers expert strategic independent Vendor Advocacy advice in both Property Marketing and Real Estate Agent selection. For more information call 1300 435 435. You’ll quickly see how we broaden your options – and benefits!
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