For the record: Underquoting is a problem, but the main issue is intent

For the record: Underquoting is a problem, but the main issue is intent
For the record: Underquoting is a problem, but the main issue is intent

What are your buying choices in the run up to Christmas? It might seem there is no choice other than to go to auction and be slaughtered. This is not the case.

Last Saturday we did not buy one home, no, not one home at auction. I think it’s our first blank canvas for the year, although we went close on 25 October. Would have been happy to buy a few, as some of the homes on offer were first rate. However, for some we didn’t have enough to start and for others at some point you have to recommend to your clients that PRICE is part of the good buying PPP equation (price, property and position). Price and value (different concepts) are about your needs (true), but they are also about alternatives. And right now that is very relevant.

In the run to Christmas 2014, buyers need to be smart about the opportunities presented to them. Of course if it’s a great home, you have no alternatives and you really, really want it; then you have to pay the piper and compete at auction. But smart buyers are looking for (and finding) alternatives in this current auction dominating market.

Underquoting/Step Quoting – back in the news

Some salient points:

  1. You have a Consumer Affairs regulator that consistently says there is no problem.

  2. You have an election happening and what do politicians do when elections are happening?

  3. You have a real estate industry that generally believes in getting as many buyers as it can to a home rather than trying to communicate.

  4. You have a market that is flying, meaning that many times it is not underquoting, but the market that is dictating the gap between quote and result.

  5. You have buyers that don’t get professional help when spending the amount of money they do and they really should, especially if the same ‘bad’ things keep happening to them.

  6. Quoting is not just about buyers, it is also about the rights of sellers. In strong markets, like we are in now, it would be grossly unfair to expect a seller to have a tight reserve range at the start of an auction campaign. Legislation requiring this to happen would, in our mind, be impractical and unfair on the seller.

For the Record

  • If an agent quotes $1 million in the final week of the campaign, then passes it in and says the reserve is $1.3 million, then that is underquoting and it is illegal. We feel the agents or the seller (if it was their instruction) should be prosecuted in court, if this is systemic within an agency. We do not approve of this.

  • If an agent quotes $1 million, updates openly, and a week later the quote is $1.1 million. Then another week later is $1.2 million and then says the reserve is $1.3 million on the day; then that may be sharp practice, but not necessarily illegal. This is step quoting, not underquoting, and we can see both sides of the argument – especially in a rising and/or strong market.

    A buyer who comes in the first week of a campaign, gets a quote and then turns up to auction three weeks later with no other agent contact, expecting the result to fall within the initial quote range; is, in this market, unreasonable and naive.

  • If an agent quotes $1.3 million and passes it in at $1.3 million and all buyers think it is worth $1 million, then that is not necessarily misquoting, it may just be a sign that we live in a free country (the seller can ask whatever he or she likes).

  • If an agent quotes $1 million and puts it on the market at $1.1 million and it sells under the hammer at $1.3 million, then that is the market and good agent work – which we approve of. We recognise that the agents have been ethical and have worked well for the vendor.

  • If an agent is responsive to the market, open in their communication and amends and updates the quote to $1.2 million to $1.3 million in the week of the auction and it sells at $1.28 million and the agent does this regularly, then that is the sign of an ethical, professional and competent quoter. You should engage the agent if you are a seller and respect them if you are a buyer. This is the agent that in the long run gets the best (money and deal) results for the sellers.

  • If an agent achieves the previous scenario eight times out of 10, then even on the two out of 10 times the agent gets it “wrong” they are still being ethical and professional if they are sincere in their attempts to communicate to the market.

Quoting perfection (100 out of 100) is not possible – as ethical and professional buyer advocates we cannot give 100 out of 100 price estimating perfection to our clients in a shifting market. This is not to excuse the serial underquoters incompetent or criminal behaviour; this is to explain to the public that professional, accurate agent quoting is about intent rather than perfection.

The real estate industry has many genuine and competent selling agents, but there is still an underlying mentality to get all buyers to a home rather than communicate.

In conclusion and to be clear, we at James Buyer Advocates think agent quoting is actually very simple, irrespective of the individual situations or the market.

It is all about intent. Is the agent trying to deceive or to inform?

For more information read our much repeated article explaining step and underquoting written a number of years ago.

The headline has been updated since initial publication.

Mal James

Mal James

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million.

Underquoting Mal James

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