Real estate agents and industry bodies have been, I feel, a little clinical, whenever I’ve asked them to understand the ire of a reader, or friend, in the property market that has been the victim of underquoting.
Their comments are along the lines of:
• Well buyers should be researching the market and know the values themselves;
• Well buyers shouldn’t get emotionally attached;
• Buyers should realise there’s at least a 10 per cent gap between quoted price and actual sale price (though recent research published in The Age shows this gap is more like 20 per cent).
I think you can drive a truck through the holes in some of these responses.
Firstly, buyers look to agents for the true value of property. I don’t believe buyers ask to be involved in this game of “pricing smoke and mirrors” – they just want the truth about what their money will buy them.
According to The Age readers I have spoken to in preparing my Domain column, it is agents skewing the figures by advertising properties for far lower than others that are comparable in the area.
I’ve seen it first hand, in a recent experience looking for an investment apartment in Kensington.
The apartment was one of 6 in a 1980s 3-storey walk-up block of flats in Eastwood Street. There are two apartments per level.
In about August, one of the two apartments on the top level, a totally unrenovated 1-bedroom flat, sold for $246,000 – against a quoted price of “$180k plus”.
A month later, the fully renovated apartment across the corridor from this flat (remember there are only two flats per level, so you can’t get much more comparable than that), was advertised at $200,000 plus.
Not surprisingly, my $215,000 offer (which represents an almost 10 per cent on the quoted price) was rejected.
The property sold for in excess of $270,000 – but not before dozens of prospective home buyers, who’s budget was around $220,000 – had inspected the apartment and got their hopes up. There was no chance the apartment was ever in their price range.
On the flip side of the coin, I’m the first to acknowledge Melbourne’s real estate market has surged this year. It was reminiscent of 2001 when property prices seemed to leap 10 per cent from one month to the next.
However, quoting $200,000 for an apartment which could reasonably be assumed to sell for more than $270,000 (and there are plenty more examples like this) – brings the industry into disrepute.
Quoted prices should reflect the moving market, not be six or twelve months behind.
An advocate once told me real estate agents continue to err to the side of underquoting, because the legislation preventing them from doing so, is a “toothless tiger”.
Basically, unless a prospective buyer who has been the victim of underquoting makes the effort to lodge a complaint with consumer affairs, allegations are not investigated.
According to advocates, agents have been able to “get away with underquoting” for so long, agents are confident to continue to quote very low, in the future.
Only a handful of complaints have been lodged with Consumer Affairs since underquoting first rose as a major issue about seven years ago. Nothing has happened recently.
Have you ever been a victim of underquoting? Who? What? When? And Where?
And – in amongst many angry Saturday night dinner table conversations after missing out on a property – did you ever think of pursuing something with Consumer Affairs?