Underquoting on Sydney property prices is the cause of endless frustration to buyers.
Some agents admit buyers are being misled and Queensland is even planning to ban agents from giving price guides. But the NSW Department of Fair Trading said there is no evidence of this being a problem.
The proposed Queensland laws - expected to be passed within two weeks - will prevent agents discussing a price guide before auction due to the ''price baiting'' behaviour of those in NSW, the state's Attorney-General, Jarrod Blejie, said.
''The issue of price baiting at auctions, which tricks buyers into thinking a home is within their price range, has become a big problem in other states and that's what the legislation is designed to prevent,'' Mr Blejie said.
But a spokesman for the NSW Department of Fair Trading said there was a public perception that underquoting was a problem but the department had received only a very small number of complaints during the past three years.''
The last big blitz by the previous NSW Fair Trading minister, Anthony Roberts, involved undercover agents swooping on more than 50 auctions in the spring of 2012. Eight agents were found to be unable to substantiate the price guide they had put on 17 properties. On Saturday, a spokesperson was unable to confirm whether any prosecutions resulted.
Human resources manager Victoria Drese has experienced underquoting first hand.
She and her partner, Aaron Michie, had been looking at properties in Paddington with price guides of $900,000 that sold for more than $1.3 million.
''I know the strategy is to get buyers in so they can create competition at auction, but it's really unfair to buyers,'' Ms Drese said. ''The agents need to be held accountable.''
McGrath Estate Agents chief executive John McGrath said up to 15 per cent of agents gave homehunters misleading price guides designed to get buyers through the door.
But he said the Queensland approach would worsen the situation and remove all transparency from the industry.
''In my opinion this is a 50-year-step back into the Dark Ages when agents held all the power and all the information.'' What little information buyers were given was often incorrect, he said.
Underquoting has received a lot of air time on Property Observer recently, and it's starting to make its way through mainstream media as well.
With a recent petition from Patrick Bright, asking for reserve prices to be published to solve this problem, seeing an uptick in signatories it's clear that we're only going to hear more about the issue.
Here are six things you should know about this topic.
It's often referred to as 'bait pricing'
Underquoting is often referred to as 'bait pricing', in the sense that it baits buyers by suggesting they may be able to snap up a bargain.
It is unlawful, and is attracting official scrutiny
Underquoting is not a legal, or ethical, practice, and recently has had Consumer Affairs Victoria pledge to look more deeply into the issue. However, they are not the first official body to try looking into the practice. Previously, Fair Trading has also apparently conducted an investigation.
The frequency of underquoting is hotly debated
There have been no official estimates, and industry bodies, and members, argue that it's anywhere from infrequent to every agent but a few. It appears this cannot be agreed upon. Property Observer has regularly asked experts about this issue, with very little consensus.
In our exclusive, we asked a number of experts 'Is underquoting an issue we should be focussing on? If yes, how should we go about addressing it?', you can see all their answers here.
Buyers lose out financially
While some will argue that a buyer will not bid beyond what they can afford, and one would hope this is true, buyers will lose out financially if they believe they have a chance of achieving the property at the lower price. Pest and building inspections, solicitors fees and the cost of their own time attending open homes and researching a property - these are all costs that a buyer will have to foot the bill for, without any chance of achieving the home.
Queensland is so concerned about underquoting that they're considering losing price guides completely
One of the most discussed stories in the industry over the past few months has been Queensland's potential removal of price guides, which the Real Estate Institute of Queensland's Anton Kardash has noted is to avoid 'such complaints' that are rife in 'other states'. “We all know that by advertising a price guide or giving an indication of the reserve price, an expectation may be set at a level that is too high or too low and this may impact on the outcome of the auction,” he said.
“It is with great pride that Queensland can say that it has largely avoided claims of misleading and deceptive conduct in relation to property price guides. Unlike in some other states where such complaints are rife, Queensland has not been subject to constant complaints of such a nature and will continue to prevent any future issues with the passing of this legislation.”
Underquoting might not even get vendors the best price
While the phrase 'Quote it low, watch it go' and variations have regularly been used to explain why real estate agents use bait pricing, it's interesting to see this in practice. At a recent auction, where underquoting was suspected, the auction actually achieved less than an earlier private treaty offer through a different agency.
If the buyers that attend cannot afford the true price the vendors want, then it's not the right crowd at the auction. All that happens is that a lot of people show up, which makes the agent look like they're doing a great job, however they are people who may not necessarily have deep enough pockets.
In every other country I have lived in, vendors state a desired price and buyers negotiate DOWN from there. This entire market is manipulated through a lack of transparency and multiple depths of bullshit.
The state government has stepped up its campaign against dodgy real estate agents, going as far as getting its Fair Trading officers to pose as young couples in order to expose underquoting.
Minister for Fair Trading Matthew Mason-Cox said that "Operation Gavel" had been targeting real estate agents in Sydney's north west.
"NSW Fair Trading officers attended open days, posing as young couples wanting to buy a property," he said.
"They recorded the sale price information provided by the selling agent, while other offices conducted overt inspections of the real estate businesses to determine if underquoting had taken place."
But despite their cunning tactics, all the agents investigated were found to be compliant in the area of underquoting.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy