Momentum is gathering across Victoria and NSW to put a stop to the deceptive practice of underquoting.
There are now two petitions on change.org seeking input from each respective state government to intervene to stamp out this unscrupulous method of selling real estate. (Victorian petition here and NSW petition here)
In spite of being a breach of regulation in Victoria, the old school practice of ‘quote it low and watch it go’ is well and truly operating. And it is often to the detriment of the vendor as well as the buyers. When an auction fails and the property passes in, the market is well and truly saying they don’t agree with the vendor’s reserve price on the day. Had there been pricing transparency from the beginning, the ‘right’ buyers could have attended and competed to buy.
In addition, there are many estate agents who do adhere to regulations and pricing guidelines. However, those that don’t create an uneven playing field, often forcing those who would rather not, to play the same dirty game. They often can’t compete with underquoting agents when they do the right thing. For example, if two agents each have a similar property listed for sale but one agent is quoting $75,000 less than the other, then of course the (perceived) ‘cheaper’ property will generate more interest, enquiry and prospective bidders on auction day.
Some agents argue that it’s the buyer's responsibility to know market prices. However, when many agencies list properties on websites with no price disclosed (POA) and at times no address either, it forces buyers to frequently enquire about property that may not be in their price range. While agents love this because it generates enquiry, where they let themselves down is by underquoting to the point where they can’t handle the volume of ‘false’ enquiries they receive and they ‘burn’ buyers by not getting back to them or not having adequate information to assist when they make the enquiry. This happens in Victoria where they rush to put a listing to market and advertise it, but often don’t have pertinent information such as a contract, Section 32 or even the land size of the property for weeks and sometime a day or two before the actual auction, again ‘burning’ buyers in the process.
As a professional buyer's agent, I am sadly surprised more often than not when an agent responds to my enquiry in a prompt manner and more surprised when they can answer all of my questions regarding the property. As a buyer (agent) it’s quite frustrating and while I understand this is one of the reasons why clients engage my services, it doesn’t lend the industry to being seen as very professional.
The introduction of new legislation to compel a vendor’s reserve price to be declared in writing across all marketing materials (print and electronic) from the commencement of the marketing campaign, will lead to greater transparency and will ensure all agents are actually following the same set of rules.
This new legislation would enable buyers to be informed about whether or not they wish to proceed with investing time, emotion, energy and money into potentially purchasing the property. It will also ensure for vendors, that genuine buyers attend the auction, reducing the reliance upon despised ‘vendor’ bids to create momentum before or during an auction, while also reducing the chance of the property being passed in at auction.
Let’s hope the government agrees!