21 Mar the great underquoting debate
Underquoting applies mainly to auctions and is term used to describe when the estimated selling price is below the owners reserve. It does not necessarily mean the estimated selling price is below the sale price. The intention or purpose of underquoting is to encourage more buyers to come to the auction who, through competition, will bid beyond the estimated selling range to achieve the owners reserve.
Sometimes a property sells well above everyone’s expectations (including the sellers) which is not underquoting. Also, a seller can change their mind during or after the auction to increase their reserve. Again, this may not be underquoting.
Some states of Australia have specific legislation controlling what price an agent must provide as the estimated or indicative selling price. Here is a link to the consumer affairs website relating to underquoting in Victoria.
Underquoting tends to aggrieve buyers more so than sellers and rather than debate the merits of all the rules and behaviours by all parties, here are a couple of very practical principals for buyers to keep in mind.
The first one is that the agent is engaged by (and paid by) the seller of the property, and their job is to get the highest price possible for that seller. A buyer should be under no illusion that somehow that agent will act in their best interest as well. Obviously that agent has a statutory duty of care but just be aware who they are acting for.
The second thing to consider is that given you are about to spend a huge sum of money to buy a property, don’t base your value judgement on advice from the seller’s appointed agent. You are best to either engage a buyer’s agent to advise you and act in your best interests, or make your own value assessment by evaluating comparable sales.
My advice is, at auctions you are best to pay little attention to the estimated selling price provided by the selling agent. By making your own careful assessment you can negotiate or bid with confidence and not waste time, money or dreams on property not in your price range. You will be doing your own market value comparisons anyway as you educate yourself on the market so you really don’t need to know what the agents estimate is.
By evaluating comparable property, you will be equally aware of its value and will not need to ask the agent.
Happy apartment hunting and good luck at your next auction.