“Pitch it low and watch it go” is a saying in real estate used by agents to entice interest from buyers. In the November issue of Australian Property Investor magazine you can read an article called “Under quoting crackdown” that gives a detailed description about how big the problem really is and what you can do to protect yourself. Miriam Sandkuhler is a buyer’s agent and director of Property Mavens and she joins us to talk about how wide spread the problem really is.
Kevin: “Pitch it low, and watch it go.” That’s the saying that used to be used in real estate by agents to entice interest from buyers. I say it used to be used, and I certainly hope it was in the past.
It’s also called under-quoting, and there’s been a lot of discussion about how to stop this practice by agents. In some states of Australia, state governments have introduced legislation to try to curb the problem. In Queensland, price ranging has been banned altogether for auctions so that agents are not able to provide price ranges to buyers, whereas in New South Wales and Victoria, the practice by agents has continued, thus frustrating the problem.
In the November issue of Australian Property Investor magazine you can read an article called Under-quoting Crackdown that gives a detailed description about how big the problem really is and what you can do to protect yourself.
Miriam Sandkuhler is a buyer’s agent. She’s also director of Property Mavens. She’s quoted in the article in Australian Property Investor magazine, and she joins us right now.
Miriam: Thank you, Kevin. Thank you for having me.
Kevin: Miriam, is this practice by agents of under-quoting getting worse?
Miriam: I don’t know if it’s getting worse; I think it’s just becoming more noted and more talked about. I think it’s been pretty prevalent for a while, and in a heated market, there’s a lot more media around it.
Kevin: Yes. Do you think that buyer’s agents like yourself and even buyers are just getting fed up with the practice and maybe that’s why it’s getting more press?
Miriam: Absolutely. Buyers are just simply not willing to trust estate agent prices anymore. Unfortunately, it’s one of those things where transparency and trust go hand in hand. So while the real estate industry refuses to be transparent around pricing, then trust won’t be forthcoming from consumers.
Kevin: You sometimes wonder whether there should be no price at all as opposed to a misleading price.
Miriam: I think that’s fraught with disaster, to be honest. I mean, having no price makes the assumption that the consumer should have an indication of what pricing should be.
It’s a little bit like selling a car and with the variety of different cars out there and the different ages of different cars, expecting the consumer to be able to figure out what a 1974 Holden Torana should be priced at versus a 1983 Commodore. It’s just really unrealistic and unfair.
I think there needs to be pricing like everything that we buy in our society – there’s a price on it. We just need transparency and honesty around that pricing.
Kevin: What’s the worst example of under-quoting that you’ve seen?
Miriam: A recent example; I was looking at buying a property for a client in a bayside suburb called Albert Park. I’d appraised the property at $2.4 million, and the agent started quoting it at $1.8 million. Over the course of the four-week campaign, eventually the top end of the quote was $2 to 2.2 million, and then I purchased the property for the client just over $2.6 million.
Kevin: Wow, that’s amazing. That’s a nightmare. Is it worse in some states than others, Miriam, as you’re getting around looking at other states?
Miriam: Certainly auctions are mostly prevalent in New South Wales and Victoria. There’s a small amount of auctioning that goes on in WA, not a lot. Certainly the whole auction concept, I think, has fallen apart now in Queensland with the changes that they have done to pricing.
Interestingly enough, my understanding in Queensland — and correct me if I’m wrong — is that now that people aren’t allowed to quote prices, there have been more declared reserves being put forward instead, because they’re not a price; they’re actually a reserve. I’ve heard a little bit of mention of that going on Queensland. But definitely the worst states would be Victoria and New South Wales.
Kevin: It’s a bit of a vicious cycle, isn’t it? I mean, buyers expect properties to be under-quoted, so an agent who does quote accurately, the buyers look at them and say, “I’m not going to pay X percent more than that.” Because that’s actually what they do. They calculate that. What is the solution, do you think?
Miriam: Well, you’re right in that there are agents who under-quote and there are agents who quote accurately. Unfortunately for consumers, the challenge that they have is that different agencies have their own internal unwritten policies as to whether or not they’ll under-quote and to what rate, and then different agents within those agencies will under-quote differently as well. So there’s no one solution of just add 10% or 20% to every property that you see, because certainly in some suburbs over others, the variance could be a 10% to 30% difference when it comes to auction day.
The solution I come back to, I think there should be a declared reserve, the figure that the vendor is prepared to take on the day at auction. If they want to be greedy, they can by all means be greedy and put a ridiculous price out there, and over the course of the campaign, if that blows up in their face, they can reduce that price. But once they’ve put that declared reserve out there over the course of the campaign, they can’t continue to increase it.
Kevin: Looking at it from a buyer’s perspective, what’s the best way for a buyer to protect themselves from being sucked in by agents in this way?
Miriam: A number of different ways. I think they need to research recent sales of like-for-like properties in the suburbs that they’re looking at. If they’re looking at a brick house on 200 square meters of land, then they want to try to find out what other brick houses have sold for recently that are also on 200 square meters of land, notwithstanding you have to compare one’s renovated, one’s not – that sort of scenario.
The other thing is to ask the estate agents for sales evidence to support their quote range. “Can you please give me recent sales to confirm why you’re quoting the property at this price? You’re the expert. Obviously, you base the quote range on something that you’ve sold recently or that you know of.” I think holding them to account in that respect.
Then attend auctions in the areas or the suburbs that you’re looking at, just to see what the market’s paying for particular property types, and again, allow a variance or variation for renovated versus unrenovated properties.
And by all means, finally, engage a buyer’s agent to help you. As professionals, we can certainly save time, money, and stress by doing all the research and searching and negotiations with the clients. While people pay us a fee for service, certainly in a rising market, time is money, and often it can cost people a lot more money in a delay getting a purchase because the market’s increased versus paying a professional to help you straight up.
Kevin: Yes. Good on you, Miriam. Miriam Sandkuhler is a buyer’s agent and also director of Property Mavens.
Miriam, thank you so much for your time.
Miriam: You’re welcome, Kevin. Thank you.