A leading property expert is calling for the real estate industry to be more transparent with property prices.
Speaking with Real Estate Business’ sister publication, Smart Property Investment, director of SQM Research Louis Christopher said there were cases of agents inflating property prices by misleading buyers.
In competitive suburbs, agents frequently played potential buyers off against one another to push up the price of a property.
“During hot markets, the private treaty system of selling a property can become completely untransparent,” Mr Christopher said.
In areas with high buyer demand, the seller and agent were deliberately putting the asking price of the property below market value.
“They do this to try and drum up interest in the property, with all the buyers thinking they're going to pick up a bargain,” he said.
Many agents then tell buyers that multiple offers have been received and they must offer a higher sum, he explained.
He said the buyer in this situation had no way of knowing whether the agent was being honest about the offers on the table.
Mr Christopher believed auctions tended to be fairer because all offers were made openly in the presence of other buyers.
“I would prefer that over a situation where, as a buyer, I am having to try and trust a real estate agent that there is another buyer out there,” he said.
Mr Christopher called for a more open property market with clear indicators of value.
“We need strong, transparent property markets where all the participants are aware of what fair value should roughly be, and where no one gets deceived,” he said.
Principal of Cunninghams Property John Cunningham told Real Estate Business property prices were the product of market conditions.
“You’re pricing a property at a point in terms of a pitch price and by the time it goes to market, there’s been a significant change in the marketplace. And by the time it gets to negotiations, there’s been significant shifts over a period of months,” he said. “Over the past three to four months in particular, you could see that value increase by 10 per cent.”
Mr Cunningham agreed that auctions were the ultimate test of the market, but added that the same level of competition that was driving up prices in auctions was also being felt in private treaty sales.
He also shared Mr Christopher’s sentiment that there needed to be more transparency in prices, saying agencies needed mechanisms in place that enabled buyers to feel comfortable in purchasing a property by private treaty.
“This is an area that I believe needs to be really tightened up. In our office, for example, we have a complete disclosure process. We don’t have any blind offers. All our offers are transparent. Some buyers and agents think this is wrong. Our job is to get the best price for the seller and the only way we achieve that it is through a transparent, competitive environment, and by disclosing where offers are at,” he said.
Mr Cunningham said his offices only accepted offers in writing and these offers were made available to prospective buyers.
“It just means that buyers have the confidence to bid on a private treaty property knowing there is order and transparency throughout the process,” he explained.