{"id":5700,"date":"2015-09-13T01:00:03","date_gmt":"2015-09-12T15:00:03","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5700"},"modified":"2015-09-13T01:00:03","modified_gmt":"2015-09-12T15:00:03","slug":"why-agents-underquote-property-prices","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/why-agents-underquote-property-prices\/","title":{"rendered":"Why agents underquote property prices? – Michael Yardney"},"content":{"rendered":"

 
\nIn today’s show\u00a0Michael Yardney<\/a><\/strong>,\u00a0from Metropole Property Strategists, looks at why agents underquote property prices and how to beat them at their own game.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 My chat this week with Michael Yardney will apply to buyers in every market except Queensland, and why? That will become obvious to you in just a moment.
\nHi, Michael.
\nMichael<\/b>:\u00a0 Hello, Kevin.
\nKevin<\/b>:\u00a0 Michael, the topic for this week is about underquoting on property prices. Particularly this relates to auction, Michael.
\nMichael<\/b>:\u00a0 Kevin, I\u2019ve been to a lot of auctions where the properties have sold for hundreds of thousands of dollars more than the agents have quoted, and I know that\u2019s certainly disappointed many perspective buyers who\u2019ve missed out at auction, sometimes being misled by the agent\u2019s quoting range.
\nKevin<\/b>:\u00a0 It’s difficult \u2013 isn’t it \u2013 because agents are not valuers, yet they\u2019re expected by buyers to give them an indication \u2013 probably fairly so, too \u2013 about where the bidding will start or where it might finish.
\nMichael<\/b>:\u00a0 That\u2019s true. I think we should, first of all, say that most agents are not being dishonest. There are two elements to it. Definitely, there are some people who do try to lure a large crowd to the auction by quoting on the low end of the range. But it’s important to draw the distinction between underquoting and the situation where competitive bidding results in a sale price way above what the vendors reserve was. Boy, have I seen a lot of those, as well.
\nKevin<\/b>:\u00a0 Yes. That use to be a saying, \u201cFeed the greed.\u201d Get the buyers there, give them a low indication. All we want to do is just get the buyers there.
\nMichael<\/b>:\u00a0 \u201cQuote it low, watch it go. Quote it high, watch it die.\u201d
\nKevin<\/b>:\u00a0 That\u2019s exactly right. Those sorts of things are fairly well embedded in the industry. But I think the culture nowadays, Michael, is that agents are a lot more understanding that they have to be very transparent.
\nMichael<\/b>:\u00a0 Kevin, it\u2019s illegal to underquote. But let\u2019s remember that the auction process is designed to extract the maximum price for a property by bringing together a group of potential purchasers in a competitive environment. I\u2019m still regularly surprised how high an emotional buyer will push prices just in their eagerness to get it. I genuinely believe an auction is a good way to sell many properties.
\nKevin<\/b>:\u00a0 I said at the opening that it would apply to a buyer in every state except Queensland. The reason being is that in Queensland, the agents simply cannot quote a figure; they can only give competitive market analysis, which is an indication of what is sold in the area, which seems to me, Michael, to be abundantly a much fairer situation.
\nMichael<\/b>:\u00a0 I agree with you, Kevin. I agree. But the system happens here. There\u2019s an owner who\u2019s thinking of selling a property, so he asks a number of agents to tell him what they think his property is worth. Of course, the vendor is inclined to go with the agent who gives them the highest price, who quotes them the highest price.
\nThat\u2019s not necessarily the right way to do things. But I know some agents are a little bit generous in this appraisal. They quote a highish price, but during the marketing campaign, they put a lower price bracket there, hoping \u2013 over time \u2013 to get the eventual selling price close to what the vendor hopes for.
\nUnfortunately, the estate agent is in a difficult position. He\u2019s a broker between the vendor, who naturally wants a top price, and the purchaser, who doesn\u2019t want to pay too much, so during the auction campaign, they\u2019re walking this tightrope, not being able to disclose the vendor\u2019s real reserve price, while buyers understandably keep their cards close to their chest also, and they don\u2019t honestly tell the agent exactly how much they\u2019re prepared to pay, either.
\nKevin<\/b>:\u00a0 There\u2019s a pretty simple solution from both sides, I think, and that is that the seller should always get a valuation done, maybe an independent valuation, and buyers should really do their own homework and have that ceiling limit.
\nMichael<\/b>:\u00a0 Very much so. Currently what\u2019s happening is the regulators are getting into stop underquoting. As you said a minute ago, real estate is a state-based law, but in general, selling agents are prohibited from quoting below the vendor\u2019s reserve price and also below what the agent\u2019s estimated selling range is, and they should have a pretty good indication, as you say, Kevin.
\nKevin<\/b>:\u00a0 Yes. Quite often, though, reserves are changed, even changed midway through the auction, so it\u2019s very difficult for an agent when they\u2019ve been told they can\u2019t quote below the reserve because that reserve could quite easily change.
\nMichael<\/b>:\u00a0 Kevin, often the reserve is only finalized the day or two before the auction. You\u2019re 100% right. They will often have an idea, and that\u2019s modified during the marketing campaign based on market feedback. Definitely, I\u2019ve seen that it happen at auction, as well, where it goes up or goes down.
\nBut there are a couple of ways that potential buyers can handle these price guides that are given out.
\nKevin<\/b>:\u00a0 What are they, Michael?
\nMichael<\/b>:\u00a0 I think the first thing is it’s important to be aware that underquoting does take place. Now, I\u2019m not justifying it, Kevin; I\u2019m just saying since it occurs, it makes sense to have a pragmatic approach to it.
\nThe next one is to do what you just said a moment ago, Kevin, and that\u2019s to do your due diligence regarding the property\u2019s value and the maximum you\u2019re prepared to pay. Research the Internet, attend auctions, speak with a variety of agents. Monitor auction results \u2013not asking prices, not quoted ranges, but exactly what\u2019s been sold. Then be realistic. Use the agent\u2019s estimate as a guide only, knowing that it\u2019s likely to sell considerably above that.
\nI guess I\u2019m biased, but I\u2019d also say level the playing field. Consider engaging the services of an independent buyer\u2019s agent because these professionals have, first of all, got access to all the sales data, and they\u2019re able to analyze it and interpret it, which is probably more important, too, and they can also negotiate on your behalf.
\nOften, Kevin, a buyer\u2019s agent can speak to an agent, professional to professional, and they can go behind the curtain and see exactly what the vendor wants and what other people are saying that they\u2019re prepared to offer so that you can put a good negotiating strategy at the auction day.
\nKevin<\/b>:\u00a0 Yes. Nice plug there, Michael. I would have been disappointed if you didn’t give yourself a plug. But let me just even it out a little bit by saying that buyers need to realize that the selling agent is working for the seller.
\nMichael<\/b>:\u00a0 Totally.
\nKevin<\/b>:\u00a0 If you really do want to level the playing field, that\u2019s a great way to do it if you don’t feel confident about bidding at an auction yourself. I just thought I\u2019d put that in because I think as an independent player, using a buyer\u2019s agent is actually a very good idea.
\nMichael<\/b>:\u00a0 Thanks, Kevin.
\nKevin<\/b>:\u00a0 That\u2019s all right. I won\u2019t ask you to comment anymore, Michael. Thank you for joining us. Michael Yardney from Metropole Property Strategists. Thanks, mate.
\nMichael<\/b>:\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  In today’s show\u00a0Michael Yardney,\u00a0from Metropole Property Strategists, looks at why agents underquote property prices and how to beat them at their own game.   Transcript: Kevin:\u00a0 My chat this week with Michael Yardney will apply to buyers in every market except Queensland, and why?…<\/p>\n","protected":false},"author":176692471,"featured_media":5701,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,10,13,22,23,25],"tags":[101],"class_list":["post-5700","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-latest-story","category-research-topic","category-selling-a-property-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nWhy agents underquote property prices? - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/why-agents-underquote-property-prices\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why agents underquote property prices? 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