Melbourne bullish auction sales typically selling at 5% above upper end estimate
Most Melbourne agents are slightly underquoting price expectations before auction, according to a Property Observer analysis of 220 Melbourne property auction results.
It showed 77% of properties sold for above the highest price indicated by the agent at auctions between July and early September this year.
Properties that sold above indications went for an average of 5% above expectations.
Of the 169 properties that sold above expectations, 28 properties or 16% sold for more than 10% above the highest estimated price indications.
The survey doesn’t include properties that passed in and sold later.
The above-estimate sales trend was most prevalent in the $600,000 to $1 million price bracket, where 83% of properties sold above agent expectations.
In the sub-$600,000 price bracket, 68% of properties sold for more than the pre-auction highest price indicated.
In the $1 million-plus price bracket, 80% of properties sold for more than the pre-auction highest price indicated.
Of the 220 properties analysed, just one sold for less than the price bracket indicated before auction.
The most notworthy case in Property Observer's survey was a two-bedroom house in Northcote that sold for 21% above the price indicated before auction. The agent was quoting $600,000 to $660,000 for the house, which eventually sold for $801,000 after enthusiatic bidding.
A four-bedroom house in Collingwood sold for 21% above the price indicated before auction. The agent quoted $860,000 to $950,000 for the house which eventually sold for $1.15 million.
The only property to sell for less than the pre-auction price indicated was a two-bedroom unit in Essendon. The agent was quoting $460,000 to $500,000 for the unit, which eventually sold for $442,000.
The auction data and price indications from the surveys were taken from data published by buyers' agents Antony Bucello and Catherine Cashmore of the National Property Buyers group.
The property auctions attended by the duo were generally chosen as high investment grade properties.
The auctions attended represent those deemed “cream of the crop properties” by National Property Buyers.
Cashmore says although the practice of under quiting is unpopular, it is hard to police.
"Buyers get very upset when properties sell in excess of a quoted range and often call for increased legislation.
"However, it’s a near impossible task to attempt to regulate the real estate sales industry to quote fairly for both vendor and purchaser," Cashmore says.
She says that according to the Estate Agents Act in Victoria, agents are required to write an estimate of likely sale price on the sales authority.
"This can either be a single price, or 10% price range. This range doesn’t have to be the vendors'asking price or in instances where the vendors' asking price is unknown, reflective thereof."
"If an agent advertises the property under the bottom number of the estimated price range it’s regarded as underquoting. However, the agent’s price quote is a conservative appraisal of what the property can easily and comfortably achieve, not a guesstimate of what buyers might pay in the heat of an auction, or for that matter, the vendor’s wish price.
"The key during an auction is to watch when the property goes on the market – if the campaign along with vendor expectation has been managed effectively, it shouldn't be far from the price quoted. However, the end number reached via bidding is largely out of the auctioneer's control."
Underquoting properties is a punishable offence – in May real estate agent Dean Anthony Johnson had his licence suspended for two months and was fined $5,000 for underquoting.
At the time Consumer Affairs Victoria director Dr Claire Noone said the laws were there to protect consumers.
“Buying a home is usually the biggest financial outlay in a person’s lifetime and laws are in place to protect consumers from misleading advertising and underquoting,” Noone told Fairfax.
‘‘Licensed estate agents should be aware of their obligations under the Act and the Australian Consumer Law in relation to advertising properties.”
Consumer Affairs Victoria guidelines on price advertising and underquoting for real estate salespeople says underquoting the likely selling price of a property in breach of the Australian Consumer Law and the Estate Agents Act 1980.
“These Acts prohibit salespeople from making representations about property prices that are false or misleading, or are likely to mislead or deceive,” the guidelines say.
The guidelines list a number of situations that they deem to be underquoting:
“Underquoting occurs when a salesperson:
• advertises or advises a prospective buyer that a property is available for sale at an amount that is less than the vendor’s asking price or auction reserve price
• advertises or advises a prospective buyer of a price that is less than the salesperson’s current estimate of the likely selling price
• advertises or continues to advertise a price that is less than a genuine offer or expression of interest by a prospective buyer that the vendor refused
• gives an inaccurate appraisal of the current market price of a property.”
"Under the ACL individuals making false and misleading representations regarding the price of a property can be fined up to $220,000 while corporations can be fined $1.1 million."
Cashmore says agents who don't suggest a somewhat low figure risk scaring potential bidders away from auctions.
"Selling agent know that to run a successful auction means attracting as many buyers as possible. The more buyers prepared to put their hand up at auction the better the result."
"No agent is going to risk 'over cooking' a property by quoting too high. It will always be placed – at the very least – a 'conservative' level.
"Whilst, I’m in full agreement of fair legislation outlawing deceitful advertising, and agree that price quotes which vary between agencies can be a ‘wishy-washy’ guideline in purchasers' eyes, buyers should not be misled into believing further legislation will change the sales process to work in their favour."