‘The chickens are included!’: Auctioneer Stephen Whitelaw at the auction of a Californian bungalow in Thornbury. It sold for $950,000.If 2012’s underperforming real estate market has a silver lining it could well be a sharper focus by vendors and agents on accurate price quoting. The New South Wales and South Australian governments are cracking down on the illegal practice of underquoting and Melbourne agents face rising pressure from buyers to provide accurate price guides.
A new study by the Carlton North-based buyer advocate Secret Agent compares the advertised quote ranges of 324 inner suburban properties offered for sale between September and November with their eventual sale prices.
More than 78 per cent of the properties sold for prices above the high end of their quoted range. But the prices they fetched exceeded their quotes by an average of 8 per cent, and many experts would regard this as acceptable. Agents use comparable sales data and should be able to quote within 10 per cent of the selling price for most properties.
Secret Agent director Paul Osborne said when a property was quoted at ”$700,000-plus” and sold for $701,000 it was counted as selling above its quote. The survey showed 36 of 38 properties in Richmond sold for more than their quote. Properties in Fitzroy and Flemington were far more likely to sell within or below their quote.
Overall, the selling prices of the 324 properties, including 180 houses, exceeded their quoted range by a median $65,000.
At the onset of a property sale, a vendor and an agent sign a listing authority. Vendors can (but don’t have to) nominate the price they will sell for on this legal document. But the agent must appraise the property and provide an estimated selling price or price range.
”If the vendor writes on the authority, ‘I want $800,000’, even though the agent appraises the property at $650,000 to $700,000, then the agent must quote $800,000,” JPP Buyer Advocates director Ian James said.
He said more agents were removing all price quoting from advertisements and more vendors were writing ‘To be advised’ in the price section of authorities. ”Agents are buying the listing by telling the vendor they will get a lot more than what they really will, and they then low-quote to potential buyers,” he said.
NSW Fair Trading officers last month attended 20 Sydney auctions in a blitz on under-quoting.
The South Australia government has introduced a bill that will make it illegal for properties to be passed in at a higher price than the reserve, which must be set at no more than 10 per cent of the price acceptable to the vendor and listed on the listing authority contract.
In today’s more transparent market some buyers are voting with their feet. Mal James, of James Buyer Advocates, said he was seeing more buyers who refused to consider properties listed by agents who had a reputation for low-quoting. ”Owners should know they are losing buyers,” he said.
He isn’t impressed with agents who tell buyers ”we have interest around” a certain figure. ”A one-off figure is not an appropriate way to put a value on a home,” he said. ”Homes really do have a wide range.”
Real Estate Institute of Victoria spokesman Robert Larocca said the REIV and Consumer Affairs Victoria encouraged agents to offer a price quote range, rather than plus-style quotes.
Saturday’s auction clearance rate was 60 per cent for the 811 auctions reported to the institute.
The original release of this article first appeared on the website of Shanghai Night Net.