Underquoting is back
Underquoting is back and it is the bane of real estate and real estate agents get all the blame. However, it is not that simple. In reality, the market, sellers, buyers and agents are all responsible. State governments argue that underquoting is misleading, buyers complain that they waste money on searches and other agents complain it gives all agents a bad name. The media doesn’t mind so much as they love a story that keeps on giving with a villain.
The Victorian State Government states that underquoting occurs when a property is advertised at a price that:
- is less than the estimated selling price;
- is less than the seller’s asking price and
- has already been rejected by the seller.
Under Victoria’s underquoting laws, estate agents and agents’ representatives have obligations relating to:
- the estimated selling price;
- comparable property sales;
- a Statement of Information for prospective buyers, and
- advertising prices, terms and symbols.
These laws complement the false and misleading representation provisions of the Australian Consumer Law (ACL).
Why does it keep happening
The points identified are clear directives but are not simply executed. Underquoting is a term that suggests there is an agenda but in reality, it is an effect of the real estate market.
The price is less than the estimated selling price
The estimated selling price is a complete unknown. The market will determine the price and agents will never get it completely right. If there are no properties on the market buyers will outbid each other for that property. That is the current market situation and the desire to own a property is very strong in Australia. The agent works for the vendor so they must present all offers – that is also the law. It is important to note that if the market is bad there is no underquoting.
The price is less than the seller’s asking price
There are almost no sellers that want less than the market price. Indeed, agents are accused of overpricing but sellers determine what they want their property for. Agents cannot forbid owners to sell their houses for an unreasonable price. You may argue agents should not take the listing but that still doesn’t stop the owner looking for an agent that will. Ironically, many agents that take overpriced listings eventually convince sellers their property is overpriced. It is actually bad practice for agents to have overpriced listings because their reputation is negatively linked to that behaviour.
The price has already been rejected by the seller
The agent by law must adjust pricing when a written offer is made and the buyer demonstrates they will and can proceed. If a purchaser has made an offer and it is rejected the agent must adjust the price to above the rejected price. Some buyers that complain that they placed an offer and it was rejected put in a high offer to secure the sale for themselves in an attempt to wipe out their own competition. The emphasis that all sellers are greedy and agents are devious is unfair because buyers are equally adopting tactics to secure sales.
Underquoting is a favourite complaint made by agents but it is not clear-cut. Buyers want to buy and will compete when there is scarce stock. Sellers want the highest price and use auctions to exploit demand. Agents are in that mix and as in all professions, the vast majority of agents want to do the right thing.
Unfortunately, it is always the unscrupulous agents that make the news but good agents want the bad agents out. We encourage reporting of dishonest agents but each transaction is dynamic and it is not always the agent causing the problem. Market demand is the driver of price not agents and that is a fact.