Underquoting still rife for Melbourne auction offerings

It seems Melbourne real estate agents continue to underquote prices of properties going to auction, according to a Property Observer survey.

An analysis of sales data by Property Observer from the results of auctions attended in the last month by buyers advocate group National Property Buyers shows 75% of homes sold for more than the upper price bracket indicated by real estate agents before the auction.

Out of the 61 sales analysed, 11 sold for more than 10% above the upper price bracket given by agents.

In cases where properties sold for above the indicated price range, the average difference was 6.5% above the upper bracket.

The analysis does not include properties that passed in or those for which the agents did not indicate a price range.

Underquoting was most rampant among properties selling for less than $600,000. Out of the 24 sales examined, just four fell within the price range indicated by agents before auction. Four sales went for more than 10% above the upper bracket.

There were 23 properties that sold for between $600,000 and $1 million, 16 of which sold for above the price range indicated, including four that went for more than 10% above.

There were 14 properties that sold for more than $1 million, 10 of which sold for above the price range indicated, including three that sold for more than 10% above.

The most extreme example was a three-bedroom house in Yarraville that had a price guide of $1.15 million to $1.3 million. It actually sold at $1,565,000, 20% above the highest price in the agent's bracket.

Out of the 61 sales analysed, just one sold for under the price bracket, falling short by just $2,500.

Of the 15 sales that fell in the middle of the agent's price guide, six sold for exactly the same figure as the highest indicated, and most the rest were very close to the highest figure.

 


 

Buyers' agent Catherine Cashmore from National Property Buyers, from which the raw data was taken, says the quotes are generally recorded as close to the auction data as possible.

"If the quote is not openly published, we aim to get it as close to the auction date as possible.  A lot of agents 'step quote'  – it's a common practice to gain as much interest as possible at the start of a campaign and up the quote in the last week to avoid any issues when the reserve is revealed during the auction – specially in a sluggish market," Cashmore says.

"However, when we catalogue the auctions, we do so during the last week of the campaign to avoid any discrepancies." 

A previous analysis of 220 auction results found 77% of properties were selling above price guides. Those that sold above were going for an average of 5% above expectations.

Commenting on those results, Cashmore says agents who don't suggest a somewhat low figure risk scaring potential bidders away from auctions.

"Selling agents 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."

Alistair Walsh

Alistair Walsh

Deutsche Welle online reporter

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