Underquoting – A Hot Topic
At our weekly review meeting the interesting topic of Sunday’s news release came up in conversation. Not only because it was an odd time for a release (Sunday not being a regular media hotspot), but because it dealt with the ever-contentious issue of underquoting.
The auction underquoting debate rears its head whenever the real estate market perks up with confidence. We would hope that most of society would actually see this confidence as our economy re-asserting its strength again and investing in its future rather than reacting with anger and disappointment.
As an agent, Terry McCrann’s article in the Herald Sun was a breath of very relevant and sensible fresh air. You can check it out here http://www.news.com.au/heraldsun/story/0,21985,25811073-36281,00.html
In the article, McCrann asks society to take a long hard look at themselves. ‘How about asking potential buyers to do something which is out of order in the nanny state? To take some responsibility for their own actions; to do a bit of due diligence’
What we’d like to impress upon all our buyers and readers generally is that fining an agent or an owner for a market rising is certainly a soft option. The agent neither buys, nor owns the property in question. Their role and responsibility is to get their boss (the vendor) the most money possible for their most valuable asset. So before pointing the finger at the agent and blaming us for ‘underquoting’, when we have done an excellent job for our ‘boss’, perhaps we should step back and look at the mechanisms that make an auction work.
The key mechanism is emotion, for both the vendor and the purchaser. You cannot legislate for emotions. At the beginning of a campaign, the vendor perception of the value of their home can be extremely different to the reserve that they set on the auction day. This ‘emotional’ journey for the vendor of either adjusting their reserve down to ‘meet the market’ or conversely raising their reserve in light of market feedback can’t be legislated against. No one could make a vendor promise to sell their property at ANY price throughout ANY campaign. This is the key point we wish to impress upon you.
Post January 2010, we will likely see CAV find a soft target agent and attempt to fine them for underquoting, a bit of a Rene Rivkin event. This will simply force agents to give the buying market less information – we will remove the quote bracket. It will simply be too dangerous for agents to give a quote range. Where does this put the purchaser? Even further in the dark than they already perceive they are.
Currently, buyers have the benefit of having a price bracket quoted to them – a guide to expectation. This guide can change throughout the duration of the campaign, as can the vendor’s reserve. The vendor’s reserve is generally given to the agent and the auctioneer the morning of the auction. We cannot force an owner to change their mind about their reserve – after all, it is their asset. The quote that is currently given by most agents to the public is a good indication of where expectation lies. A better quality agent (like ourselves at Harcourts CBD) will also give you relevant comparables so you can make a decision for yourselves as buyers. So what are you going to be fining the soft target estate agent for? Not being able to predict their clients future emotions about the value of their asset? Or for the emotions of competitive buyers?
I would encourage you all to read McCrann’s excellent article and think about the way you want your society to be managed – are you happy to make decisions for yourselves, or would you prefer to keep pointing the finger at others? There are lots of tools out there if you want them – not only the weekly sales reports on Sundays in The Age and the Herald Sun, but also through websites such as domain.com and realestate.com. Happy hunting!
For any points of discussion for the topic of underquoting, please comment below. We are very keen to hear your thoughts and perspectives on this quixotic topic!
For further information on this, or any other property needs you may have, please contact:
Director – Harcourts City Residential
Ph: 03 9664 8100 Mob: 0417 318 705
*Harcourts City Residential has gathered this information to provide an interesting document for apartment owners and prospective purchasers. Harcourts City Residential may not have affected any or all of the transactions noted; rather we’ve gathered as much market information as possible on ALL transactions to be as conclusive as possible.
Information contained herein is gathered from a range of sources including but not limited to; The Age Property Results, The Herald Sun Property Results, Valuer General Information & Agents own investigations. All efforts are made to verify the information provided. The information is not to be relied upon or used in dealings with third parties and people should make their own investigations regarding their own property or personal circumstances. Opinions offered are just that, our opinions & observations and should not be treated as fact.
If your property is exclusively listed with another agent please disregard this communication.