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Underquoting is the single biggest problem facing the real estate industry, according to one business owner and agent.
In conversation with REB, Century 21 Radar Properties principal Peter Brack has reminded agents that not only is the practice of underquoting illegal, but you are actually attracting the wrong type of buyers to the property you are trying to sell.
“Typically, what agents will do is they will go in and they will make it a 10 per cent price range that we have to put on the agency agreement. They will make that 10 per cent price range as low as they can possibly get away with, and they say to the vendor, ‘We will make that as low as possible — we’ll get lots and lots of buyers in, and then we’ll try to pull them up in price’.
“There is a couple of really, really big problems with that. First and foremost, it’s illegal. Secondly, you are attracting the wrong type of buyers.”
Mr Brack said that by pricing a property so low, buyers get a sense that they might be able to pick it up for that lower end of the range, which can be a waste of the agent’s time.
“You’re not spending your quality time with the buyers who have got the higher budget that you want,” he considered.
He also flagged the pitfall that agents can succumb to, where potential buyers end up “getting the shits because they’ve been quoted a price guide on a property [that] ends up selling hundreds of thousands of dollars above the reserve”.
“That tarnishes every agent with the same brush, because they all think that we’re liars,” Mr Brack conceded.
Calling current underquoting practices “beyond a joke”, the principal said he hears from buyers “all the time” that they’ve made offers on properties at the top end of the quoted price guide and owners have still said no.
Then, the properties have been taken to auction and sold for $100,000, $200,000, $300,000 more.
He said buyers have been educated by the industry as a whole, that the price guides are artificially low: “Whatever price the agent tells me, I might as well add a couple of hundred thousand on to it.”
In his own practice, Mr Brack explained that one of the big things they do is try and make the price guide as accurate as possible, and build trust with potential buyers.
He does this by going through with the vendor’s evidence of what’s sold and what the current market conditions are like, explaining that: “I like to price my properties so that the top end of the 10 per cent range, if I get an offer, at that price, you will say yes, guaranteed.”
Then, he does the same with potential buyers, outlining to them the process he goes through in pricing properties for vendors.
“I explain to them, ‘This is what I mean when I say a price guide, this is what we are expecting buyers to offer, these are the reasons why, here’s the evidence of other recent sales in the area’, so that buyers also feel comfortable that they are not paying too much,” he said.
“You can’t have a sale without both a vendor and a buyer, so you’ve got to treat them both with respect.”
Mr Brack has previously iterated the importance of agents getting “the best possible price for your vendors, because they are the ones who pay you”.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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