Sale prices edge 8.7% above estimates of Melbourne agents underquoting at October auctions

Sale prices edge 8.7% above estimates of Melbourne agents underquoting at October auctions
Sale prices edge 8.7% above estimates of Melbourne agents underquoting at October auctions

Melbourne real estate agents continue to underquote properties selling at auction, according to the latest Property Observer survey on the issue.

An analysis of 74 sales catalogued by National Property Buyers over the last four weeks shows 55 of those properties sold for above the price range indicated by the selling agent prior to auction.

That’s just shy of 75% of properties selling for more than the upper bracket of the quoted price range.

On average, those 55 properties sold for 8.7% above the upper bracket of the price range indicated by the agents.

Property Observer’s most recent underquoting survey found 75% of September surveyed properties sold for over price indications. Those that sold above went for an average of 6.5% over.

Prior to that, an analysis of 220 auction results in the months leading up to spring found 77% of properties were selling above price guides. Those that sold above were going for an average of 5% above expectations.

Just one property sold for below the price range indicated by agents prior to auction.

The properties analysed were only those where a price range was given with a lower and upper price indication.

Buyers’ agent Catherine Cashmore, who compiled the raw data for this survey, says buyers can expect to pay more than the price indicated before auction.

“Price quotes are important to attract buyers in the first place – no buyer likes to play guessing games when it comes to putting a price on an advertised listing.  However, as with any auction, the quote has to be at a level to attract as many potential purchasers as possible, whilst at the same time, not being too far from vendor expectation to achieve a sale,” Cashmore says.

“There are still agencies who quote at a level which we know from our own research to be too low to reasonably achieve a sale within the advertised range – we come across them weekly – and it would be fair to suggest buyers can expect to pay above the advertised price quote in most circumstances, especially when there is competition.

“However, bear in mind, every real estate sales agency quotes differently, so it's always important to do the necessary leg work to avoid wasting time and money inspecting a home, which will only ever achieve a sale price in excess of the advertised figure.”

 


 

Cashmore says more owner-occupiers in the market can push up auction prices.

“Stock levels have been plentiful this year, however the 'best of the best' has not been in abundance.  Owner-occupiers have dominated the inner-city market (with numbers of investors reduced due to continual poor consumer confidence), and it's well known that owner-occupiers are the demographic willing to pay an extra 5-10% more to secure the home of their dreams.  Hence why owner-occupiers fuel price growth and hence why 'investment grade' homes are chosen to attract this demographic.

The most extreme case of underquoting, or overly enthusiastic bidding, was a two-bedroom Collingwood house that sold for $662,500, 50% above the pre-auction indicated price range of $400,000 to $440,000.

A four-bedroom Fitzroy North house sold for $1,845,000, or 29% above the pre-auction indicated price range of $1.3 million to $1.43 million.

And a two-bedroom Hawthorn apartment sold for $652,000, 25% above the pre-auction indicated price of $470,000 to $520,000.

The $600,000 to $1 million bracket had the most cases of underquoting. Of the 26 sales in that bracket analysed, 23 or 88% sold for above the pre-auction indicated price range.

Of those 23, 17 sold for more than 5% above. Those 11 properties sold for an average of 11% over the pre-auction indicated price range.

For properties selling under $600,000, 64% sold for above expectations for an average of 5.7% over.

For properties selling over $1 million, 70% sold above expectations, an average of 10.2% over.

The property sales analysed come from National Property Buyers weekly survey of the Melbourne market.

The properties recorded those thought to be investment-grade or cream of the crop properties. They are thought to be properties that hold the best potential for long-term capital growth and rental demand.

The price quotes are received as close as possible to the auction date to avoid step quoting practices.

Cashmore says agents who put their price quotes too high risk scaring away potential clients. While Cashmore agrees price quoting can be frustrating for clients they must realise that more legislation won’t stop the practice.

 

Alistair Walsh

Alistair Walsh

Deutsche Welle online reporter

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