Nearly 100% above the initial price guide? Underquoting rears its ugly head

GUEST OBSERVATION

It is interesting how underquoting is allowed to rear its ugly head.

Last week, the government-owned heritage property at 119 Kent Street, Millers Point (pictured above) sold at auction for $1,911,000, through McGrath.

The initial price guide was reported to be $1,000,000 and then adjusted to $1,300,000. The property, as we well know, has been sold for $1,900,000. Almost 100% above the original price guide. Jonathan Chancellor’s article on being prepared to adjust your expectations at auction by 11% just went out the door. I cringe with disbelief that this has been allowed to happen.

This auction campaign was backed by the NSW state government. I wouldn't suggest that because of this the agents running the marketing campaign/auction sale have been absolved from following the strict guidelines of the real estate industry's regulations, but the agent has not gained any credibility. It could just be a sheer case of blatant ignorance and an agent simply not understanding their industry. But then again any publicity is good they say, even if it’s bad.

The property itself, regardless of the state it was presented in, has vast inherent value - it is located in an address that boasts local sales of up to $6,000,000. A harbourside, and much sought after, prestige location that for the postcode alone is worth $1,000,000.

Now, if we add the historical and actual building value, we could comfortably add hundreds of thousands more. Then there is the value of the actual block of land. Even if we looked farther afield, to Annandale and Leichhardt, shacks have reached the $1.2 million to $1.5 million mark in the past.

How, in heavens name, did the agent come up with the original price guide and, even when adjusted, fall so short of where the offers finished?

Were they looking for a crowd? Or publicity perhaps? I can’t figure it out.

If it is sheer ignorance, maybe a professional valuer should have been called in to provide a realistic price guide. I am once again alarmed how this four bedroom home in this location was advertised publicly for so low. The underlying question is: did the low price guide also work against the price achieved? Could a more realistic price guidance have attracted a different clientele that would have pushed the price even higher?

I guess we'll never know.

EDWIN ALMEIDA is managing partner and licensee-in-charge of Just Think Real Estate.