Will Under-quoting Ever Actually Stop?

Buying a property in Sydney (in the current market) is more often than not a frustrating and stressful experience (not to mention costly). The fact is, it shouldn’t be - but it is.

Date:

01-Aug-2017

Category:

Buying

Tags:

Author:

Emma Blake

Will Under-quoting Ever Actually Stop?

Buying a property in Sydney (in the current market) is more often than not a frustrating and stressful experience (not to mention costly). The fact is, it shouldn’t be - but it is.

Buying a property in Sydney (in the current market) is more often than not a frustrating and stressful experience (not to mention costly). The fact is, it shouldn’t be - but it is.

Whilst it is all good and well that the Office of Fair Trading has brought in major changes to what agents can say when it comes to the marketing of a property, in reality, nothing has actually changed. Not the fault of the OFT, obviously something had to be done, but the changes have made no real impact into the actual problem… 'Under-quoting'.

Whilst an agent can no longer say “offers over” or put a ‘+’ symbol after a price, the truth is, the agents that were most guilty of doing it before are still doing it now - in a slightly different way.

Now, they simply price the property even lower. Without using the tactics that are no longer allowed, you can still do things like advertise a price guide of $1.5m (even if the property sells for over $2,000,000). It is all about what is written on the agency agreement and it is being done all over Sydney.

Why am I telling you all of this? Simple, it’s wrong. If an agent is relying on pricing a property at 20%, 25%, 30% (and often even more) below what it sells for, then they are not doing their job, they are relying on creating false competition between buyers who never actually had a chance of purchasing the property.

These poor people spend their money on building and pest reports, strata searches, solicitors revising contracts and all the other costs involved (not to mention the emotional roller-coaster of actually trying to buy the property), quite often to find out they are knocked out by the very first bid at auction – they never had a chance!

Problem with it is, these people then look down at our industry and call it a joke, but the truth is that the best agents don’t need to do this, the best agents can actually achieve the best price for their Vendors without having to constantly burn buyers in the process.

On the flip side, low price guides don’t work for sellers either (even though you might think they do because they create a lot more competition). A low price guide can actually create a ‘ceiling price’ for what the property will sell for. What this means is when the negotiations start to get significantly over an agents price guide, even buyers start questioning whether they are paying too much. As such, low price guides don’t work for buyers nor they don’t work for sellers.

If you are looking to purchase a property and an agent is giving you a price guide that almost sounds too good to be true then the fact is, it probably is. It is up to you to research the market, see what comparable properties have sold for and find out the situation of the Vendor (if you can).

On top of that, look at the agent. Look at their track record and some of their recent sales. Agents that constantly under-quote have a track record of doing so. Sure there can be that one off property that a couple of buyers just go mad for at auction and it goes way over the odds, but these are generally one-offs and exceptions to the rule. Checking an agent’s track record on what they quote vs the final sale price will give you a good idea of the type of agent you are working with and how they play the game.

In this day and age, there has never been as much information as ever before - available at the press of a button. realestate.com.au pushes agents to put their prices on all sold properties (or as many as they can), which gives you an excellent (and free) way of looking up sale prices. You can also subscribe to programs like like RP Data and APM and they will provide you with detailed information on individual properties, a market opinion (based on statistics and trends) and sales evidence for the area including comparable properties.

So whilst under-quoting looks to remain for the foreseeable future, there are definitely ways you can minimise the stress and frustration of constantly missing out on properties you never had a chance to buy.

If you are looking to buy in Sydney and wouldn't mind getting an agents point of view, why not give me a call and get some great advice for free.