In a booming property market, homes are selling at auction for sums that blow the agent’s price guide out of the water. But the issue of underquoting is nothing new. Years ago, my partner and I set our hearts on a rundown (let’s be honest, derelict) house slated for sale at auction in Sydney’s inner west. The agent quoted an upper price estimate, which was within our budget though at the top end.
Hopes came crashing down when the auctioneer opened bidding at the top price we’d been quoted. After exchanging “What the?” looks, we slunk out of the auction room leaving buyers with deeper pockets to fight it out.
Fast-forward to 2021 and underquoting is once again making headlines as shell-shocked house hunters watch properties sell under the hammer for prices that dwarf the agent’s price guide.
In June, a Toorak mansion sold at auction for $14.25 million, smashing the upper price guide of $11.5 million. In March, a Bondi apartment sold for over $20 million, with the opening bid being a market-whacking $14.5 million though still within the price guide of up to $15 million.
While both homes are prestige properties, underquoting can deliver serious hip pocket pain to buyers with more modest aspirations. Ticking the boxes for due diligence – having the sale contract reviewed by a legal professional, and arranging pest and building reports – has the potential to rack up fees of around $2000, which can prove pointless when a home sells for vastly more than the price guide.
But in today’s hot market, are agents underquoting as a form of bait advertising? Or is competition so intense that it’s becoming impossible for even professionals to accurately predict what a property will sell for?
Difficult to prove
Angus Raine, executive chairman of Raine & Horne Property Group, is a veteran of five property booms. “Every time a boom comes up, the underquoting debate kicks off,” he says. “There is legislation and fines in place in some states to prevent underquoting, and regulatory authorities do check this. But in a fast-moving market, underquoting is difficult to prove.”
To be clear, underquoting occurs when an agent deliberately publishes a guide that’s below their reasonable estimate of the home’s likely selling price. The keywords here are “reasonable estimate”.
“Accurately estimating a property’s likely value comes down to three factors – comparable recent sales, an agent’s experience, and market conditions,” says Ray Ellis, chief executive of First National Real Estate.
However, as Raine points out, the downside of basing price estimates on recent comparable sales is that agents are looking at the market in a rear-view mirror. “In 35 years I have never seen a property boom like the present that extends right across Australia, including regional markets. And, yes, some of the prices we are seeing property sell for at auction are unbelievable.
He says auctions represent only about 20% of the market. “But right now, the planets have aligned for exceptional market conditions across the board.”
Continue reading your story on the app
Continue reading your story in the magazine
The Reserve Bank lifts interest rates earlier than expected
Property has boomed, thanks to cheap money, but rising inflation in the US means that may change sooner rather than later
Take the bite out of vet bills
Buying cover for your furry friend can cut the cost of pet care and avoid heartache
Staying aware of hidden threats
Spread the love
For a nation hooked on real estate, investment trusts provide valuable diversification and liquidity
Retail's rollercoaster ride
As lockdowns change the way we shop, some surprising winners are emerging from the battle for the consumer dollar
It's a big stretch to get on the housing ladder
Many young adults are living at home for longer or getting parental help so they can buy their first home
7 Steps To Building A $100k Income
The commercial sector is seen as too intimidating by many investors, but you can start a portoflio with $100,000 in cash savings
Prepare For A Green Future
It’s not just the big polluters that will have to change their ways. The carbon-conscious movement is catching up with investors too
9 Tips For Buying And Selling Property
1.The Buyers Agent 2.The Budget 3.Lenders Mortgage Insurance 4.Recurring Payments 5.Joint Ownership 6.Valuations 7.Bridging Loans 8.The Real Estate Agent 9.Auctions
Key roles in the money game
Within a relationship, we tend to slip into doing tasks that may not match our skills
NOTHING TO HIDE?
A WEEK AFTER SHIA LABEOUF’S EX MADE SHOCKING ALLEGATIONS ABOUT HIM, HE’S SPOTTED MAKING OUT WITH ACTRESS MARGARET QUALLEY.
A TWIST IN THE TALE
As new episodes of his critically acclaimed series Servant get set to drop, film-maker M Night Shyamalan talks to Arun Janardhan about his second innings in Hollywood and telling dystopian stories in dystopian times
As the showstopper of all Dubai hotspots, delve deep into the 12-year journey of Zuma
A SIAM Environment Series :Environmentally Sound Management of ELVs in India
The second lecture of the two-part environment series provided an overview of the technological imperatives in design and material eco-efficiency of ELV recycling.
SPIDES LIKE US
ALIEN INVADERS USE A RAVE DRUG TO FIND HUMAN HOSTS IN GERMAN-MADE SCI-FI SERIES SPIDES. WE GO ON LOCATION IN BERLIN
KEEPING IT SAFE
SAFE MANUFACTURER USES A SOFTWARE TO CREATE A NEW GENERATION OF PRODUCTS.
Can Zuma’s little sibling live up to the family name?
NORIYOSHI MURAMATSU BRINGS HIS BRAND OF MODERN JAPANESE DESIGN TO A HAUTE NEW DUBAI VENUE.
Seeping in Through the Cracks
Chandni Gajria reiterates how sometimes finding a muse means peeling off the layers and really listening to yourself.
Terri's Family Court Battle
COULD THE OFFICIAL DOCUMENTS REVEAL TROUBLE?