We all understand that buying property can be a very emotional process, particularly when you think you have found the perfect place to live, love, and raise a family.
If you’re going to auctions ready to buy, hoping to be the winning bidder but being outbid time and again, it can be a real rollercoaster, and disappointment that follows excitement is just about the worst kind of disappointment.
Unfortunately, the law of supply and demand means that every weekend there are many, many more disappointed potential homebuyers than there are delighted new homeowners.
It’s even more disappointing and frustrating to think that you wasted time and effort considering a property and attending an auction when you were misled as to the estimated selling price, and it was out of your range all along. You could have been putting that time and effort into a different property you actually had a better chance of buying.
This is essentially why governments and consumer protection authorities, such as Consumer Affairs Victoria (as directed by the Consumer Affairs Minister), are determined to crack down on the practice of underquoting.
Underquoting happens when a real estate agency advertises or promotes a property at a price it knows to be less than what they truly believe it to be valued at and/or what the vendor will accept.
Like any advertising, the point of advertising a property for sale is to get as many people as possible interested in buying it, but telling people that they might be able to buy it for less than it’s really worth is not only misleading, it’s unethical.
It’s important to keep in mind that throughout the sales process, the real estate agency is working for the vendor, and its main aim is to maximise the selling price.
However, they have to be honest with potential buyers and underquoting fails that requirement.
In New South Wales, Fair Trading has introduced new laws in an attempt to crack down on underquoting and Victoria is looking to bring in similar changes later this year.
While it might be hard to accept, there will probably always be agents willing to try any tactics to achieve the highest possible sale price, but the more underquoting is policed and the more it is frowned upon, the less likely that agents will think they have to play dirty just to be in the game.
As long as there are rumours or allegations of underquoting, some agents will think “maybe we need to do that, too”, and consumers can be excused for thinking the practice is even more widespread than it is.
Over recent years, it’s far more likely that the agent and the vendor – as well as many of the bidders – have done nothing worse than underestimate how much genuine interest there is in a property … and how much the interested parties are willing to pay to get it.
Certainly here in Melbourne you don’t have to try very hard to get people interested in buying property, in general, although it can be extremely challenging to promote individual properties when there are so many open for inspections and auctions, and buyers’ time is limited and valuable.
In the end, the perfect result of a win-win, where both the buyer and seller are delighted after an auction, is what we want to achieve, so we really do have to understand not only the market but also people.
We have to be able to advise the vendor how best to present their property to firstly attract the greatest interest and secondly to achieve the highest possible sale price. Often the two go hand in hand, but attracting a few committed bidders is better than having a whole lot of people attending an auction just to see what happens.
Our great challenge is to understand the emotions that are involved in buying and selling property – not to mention transactions of hundreds of thousands of dollars – just as well as we know what a certain type of property in a certain street is really worth.
In the long term, our reputation will continue to be built on our ethics, integrity, and the way we treat people, just as much on successful sales and satisfied vendors.
Crackdown on real estate underquoting in Victoria (Herald Sun, March 4, 2016)
Real estate agencies investigated for suspected underquoting (The Age, January 10, 2016)