Avoid Being a Victim of Underquoting
It’s the hope that kills you.
Imagine falling in love with a property but ending up disappointed because you have been defrauded by underquoting.
Choosing to purchase a home is a significant decision that must be well considered.
When it comes to purchasing in a competitive market, doing your research pays off.
So even before you get victimized by “bait pricing”, read on our recommendations so your preparations for your dream property will not go to waste.
Underquoting is the deceptive practice of advertising a property with a price guide that suggests to prospective buyers that it may sell for less than the agent knows the seller will accept.
Accusations of underquoting have been widespread in recent months, as national property values have accelerated 24% over the previous year.
There’s no question that some agents have been underquoting properties on purpose to entice buyers. But that’s not always the case.
According to the President of the Real Estate Buyers Agents Association (REBAA), Ms. Cate Bakos, selling agents are frequently blamed unjustly for their refusal to anticipate a strong competitive outcome, and in many situations, vendors have the right to alter their price expectations without consulting with their agent.
Ms. Bakos added, “underquoting is amplified by a rising market”.
As a result, less underquoting should occur as property prices in Sydney and Melbourne rise and the rest of Australia begins to follow.
Why do agents underquote?
The most common reason vendors and agencies underquote, according to Ms. Bakos, is because they believe an underquoted property will lure more purchasers.
These purchasers, on the other hand, are more likely to fall in love with the property and find a way to compete against more cashed-up buyers, pushing up the final price.
“The reality is that many buyers find themselves shortlisting properties that are beyond their financial constraints, and this can lead to disappointment, wasted expenditure for building reports and due diligence, and lost opportunity,” added Ms. Bakos.
Isn’t it against the law to underquote?
While price guide legislation varies by state and territory, Ms. Bakos observed that the issue was widespread in many cities across the country.
She said while underquoting is illegal, there are several legal gaps in the current law, particularly in Victoria.
She cited Victoria as an example, where vendors are not required to declare their reserve price until just before the auction.
Some bad agencies take advantage of this by advertising the property at a lower rate than that which would be considered reasonable or a reasonably anticipated reserve.
Tips to avoid being underquoted
Instead of depending on the real estate agent’s estimate, conduct your own research.
You can accomplish this by looking at comparable sales in the previous month or two on sites like Domain and realestate.com.au, and comparing similar properties and locations.
It’s better than remaining in the past and relying on older, less accurate sales according to Ms. Bakos.
Here are REBAA’s best advice for avoiding being underquoted:
1. Explore comparable properties by location, size, and condition.
2. Spend the months before active bidding time in thoroughly inspecting as many properties and areas, as well as the communities around, as you can.
3. Look at comparable properties in the neighborhood and see what the agent’s initial published range of pricing was; what the reserve price was; and how much it sold for.
4. To “buy with confidence,” consult with and hire a REBAA-accredited buyer’s agent to handle the procedure.
Just as importantly, don’t forget to contact us at Will Bell Mortgage Broker ahead of time to have your finance pre-approved.
This way, come crunch time, you will spend less time on your finance application and have more time researching to ensure that the property you dream of haven’t been underquoted.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.