Is This an Example of Underquoting in Sydney?

timmythelamb on 07/08/2022 - 08:18
Last edited 08/08/2022 - 12:21 by 1 other user

Hi OzBargain, I would really appreciate your help on this one.

My wife and I attended an auction on Saturday, hoping to grab our first apartment to be our home. The advertised price guide was $700k-$770k. We were unsure about marker interest so thought it would be a great learning opportunity to go.

Of the 15 or so people there, I realised that I was the only registered bidder. So I started off the bidding at $700k, being able to react to the vendor bid.

The agent at this stage takes us into another room and tells us this this is not enough. That the vendor is only willing to sell for more than $800k. We say that the best we can do is $750k. We go back to the main room and they make a vendor bid of $800k. No one is willing to go over it including us, so it is passed in. They said they might negotiate with us throughout the week.

My question is are they underquoting the property? Since the price guide advertised was $700-$770k but they were clearly never going to sell it for that. They have now changed the listing price to $840k.

Thanks for your help OzBbargain.

P.S. We are also going to chat this through with our conveyancer before approaching the agent again

Financial

Comments

      • Jono05 on 08/08/2022 - 13:08
        -1

        The reserve price is usually decided in the week leading up to the auction (usually 3 days before). Buyers comments and offers can be used to decide the reserve price. So can the reserve price be quoted in marketing material?

    • Other on 11/08/2022 - 04:58

      Depends. There are a lot of assumptions.

      You can't force an owner to name a reserve price and stick with it.
      What happens if the vendor changes their mind?
      Contract law won't allow it as it requires a buyer and a seller to agree with a price on the actual contract.

      No buyer is going to agree on a price without testing the market. Also think about Mortgagee sales.

  • Boogerman on 08/08/2022 - 10:29
    +13

    It’s a buyers market with crashing prices.
    Use a friend as a lowball dummy bidder & lowball yourself & you’ll eventually get a vendor to sell - it’s the reverse strategy of a vendor bid.
    Could save yourself $100K

  • TransportPosters on 08/08/2022 - 12:03
    +2

    This is what happened at my first ever time being a bidder for a property about 12 years ago in Melbourne. Can't believe it's still going on, I thought it had been fixed up with regulations or something by now.

    I was really treated like crap by the agents after the property passed in because it opened way above what I had discussed with them during the week. Was a shock and left me feeling like I didn't want to go to another auction again. The other parties didn't bid either. The agents wasted our time and the vendor's time (and money).

    I ended up getting something via private sale instead.

  • trapper on 08/08/2022 - 12:13
    +14

    The whole concept of a 'vendor bid' is absurd, what a joke really.

    • neo on 08/08/2022 - 12:55
      +4

      The more you think about it too the more absurd it actually is.

    • Davo1111 on 09/08/2022 - 05:51
      +13

      I don't mind the idea of a vendor bid, but if it does happen, the vendor should be forced to pay the stamp duty for their own house

  • Cartmanizm on 08/08/2022 - 13:06
    +2

    The agent can easily claim that the Vendor had a change of mind on the day of the auction and has set a higher than expected reserve price.

    • Jono05 on 08/08/2022 - 13:08
      -2

      This!!!

  • timmythelamb on 08/08/2022 - 17:10
    +1

    Just as an updated for anyone interested, the following document discusses underquoting residential property in NSW (other states and territories may have different laws).

    https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/00…

  • Heaps for Cheaps on 08/08/2022 - 20:13
    +1

    Can OP please name and shame.

    • timmythelamb on 08/08/2022 - 21:49
      +8

      The agency is Ray White. Unfortunately, we are still interested in the place and waiting for the agent to get back to us, holding on to the idea that the vendor will eventually realise the current market we are in. So won’t share the place or the name of the agent.

      Am happy to share more deets if this falls through or if a deal is made.

      • slowmo on 09/08/2022 - 10:19

        unfortunately, i have not interacted with an agency that has a franchise name (or not), that isn't somewhat dodgy. be it rental, or looking to buy .

        there was only once that was the contary, 1 was when i had a friend who is in the business that i knew well that helped me with off the plan stuff, and 2 was borderline helpful because I hired him as a buying agent.

      • Hangryuman on 09/08/2022 - 10:49

        AFAIK Ray White is a franchise - probably independently owned agencies sharing brand-name advertising

        I believe Ray White started in Toowong Brisbane as a single agency - then franchised to many agencies

        so as with many franchises, a single bad store doesn't necessarily mean all those brand stores are bad

        could be - just not necessarily so …

      • Gunnar on 09/08/2022 - 21:40

        Good luck for it all if you’re still interested! I’ve had many a chat with my broker who was also an estate agent in a former life. He was saying one of the hardest things to do in a falling market is managing expectations of vendors in a falling market.

        Auctions suck; we bought a place a few months back but missed out on a couple and I just really hate them. A$$hole vendors also suck, sadly I’ve had two encounters where the seller was the one who was the problem (I won’t go into details for how I came to know?

        Whether you’re buying, selling, renting or a landlord dealing with agents sucks. There are some really nice ones out there but for the most part they suck. Whatever happens I hope it works out for you guys!

  • TChalla on 08/08/2022 - 23:03
    +1

    Every property is underquoted brah

    • [Deactivated] on 09/08/2022 - 07:57
      +1

      Braaaaaaaah

  • unhuman on 08/08/2022 - 23:12

    I would offer 500k if they call.

  • ald on 08/08/2022 - 23:17
    +2

    Unless you can prove the agent knew the minimum price ("reserve") BEFORE the auction, but with enough time to change the advertisement, it's going to be damn near impossible to do anything.

    Corrupt state of affairs.

  • Miss B on 08/08/2022 - 23:31
    +4

    I'm looking to buy my first home at the moment and have been getting a pretty good idea of the market near me. The price guides for private treaty are not too bad, some vendors want to get unrealistic prices for their properties as the market is slowing and their properties are staying on the market, while others sell much more quickly in comparison.

    There are 3 properties that were listed for auction by the same real estate in the same week and I can say with absolute certainty they are listed too low. I took a look at them anyway, but the amount of people who showed up to the opens was insane compared to the other opens around here. This confirmed for me that they were listed too low. I see you mentioned Ray White, which is also the real estate for these properties. I don't think it's limited to them though.

    I've made the decision not to bother with houses listed for auction, for one I don't want to get the building and pest inspection for houses I may not even get (and given the number of people at the opens I'm unlikely to get). I was also told to always get subject to valuation in the contract by the lender and I confirmed with the agent you have to go unconditional for auction. But yeah, the unrealistic listing prices is just another reason not to bother.

    There are plenty of places around, if I can't buy one I'll buy another, I'm not getting attached to any property until I've bought it. Most where I'm looking aren't auctions so it's all good, not sure what it's like there, I've heard some areas they pretty much only do auctions. To avoid disappointment if you have to buy at auction, I would say go for places that are listed under your budget, worst case you get a property for less than you expected.

    • Hangryuman on 09/08/2022 - 11:00

      the only benefit of auctions to buyers is the usual visibility of other bidders (unless on the phone, etc.), and the ability to secure the purchase contract on the day and not be screwed around thinking you're the top bidder only to be gazumped (in NSW) by someone offering slightly higher and getting the contract signed that you never saw - that's rife in Sydney and it's a major PITA I experienced when I offered full price but didn't get to the office in time - and believe the agent's friend bought it as it was a good deal - dodgy AF.

      I've also worked as a real estate salesman and have seen hundreds of auctions - ignore quoted price guides, and familiarise yourself with actual sold prices - when you are comfortable with what you want and what you're willing to pay, decide your top price and go along on the day, register to bid, count how many others are registered (and are holding bidding cards), then decide your strategy - I only bid last before the third and final call, and then ignore agents 'just one more bid' blandishments/pressure - and have secured several properties including for acquaintances that way.

      • Miss B on 09/08/2022 - 13:31

        When you bid at auctions do you get a building and pest inspection done before the day? If it goes a little high, does that cause any issues with the valuation for the lender?

        I did actually quite like two of the properties that are for auction, just don't think I like them enough to bid at an auction and not have the safety net of the inspections (waste of time and money getting them if I don't get the property) and if anything goes wrong with the financing, despite approval subject to valuation. I guess anyone who's there due to the low listing prices will be out if it goes above what they want to spend, so number of people probably isn't a concern.

        • Hangryuman on 10/08/2022 - 11:51
          +2

          'When you bid at auctions do you get a building and pest inspection done before the day?'

          no because I'd rather rely on my 60 years of DIY experience checking and fixing hundreds of houses - I've paid for 'professional' building and termite inspections and usually they come with a long list of exclusions like 'we didn't check', 'we are not responsible for', and 'we only looked outside' rendering them more likely a WOFTAM.

          better to get a builder friend with years of experience to walk through with you and pick out faults as they see them - and if they see signs of damp/rot/risk then you can immediately point that out to the agent on the spot and say this is a likely expense making it worth less - which they can take back to the owner as a reason why they shouldn't expect so much on the day.

  • dbun1 on 09/08/2022 - 05:35
    -1

    The issue is that this is hard to prove. The agent just needs to show that there are other comparable properties in the area to justify the advertised price and they can simply say the vendors changed their mine on the day based on interest etc.

  • jellykingdom on 09/08/2022 - 06:27
    +1

    Good luck trying to get the government to do anything. I have dobbed in 2 agents previously and the response is always "well the market sets the prices". Ok yes that is very true. But the agent also listed and told us a much lower price and presumably also the other 20 people who didn't bid either at the auction…
    I thought it was 100% clearcut both times but no action at all. Pretty BS

    • Miss B on 09/08/2022 - 08:16

      In the case of the OP, the market set the price at $700-$750k, because they were the only ones willing to buy and that's what they were offering. I think some vendors are struggling with the slowing market and accepting that they may not get what they want for their property.

  • KaTst3R on 09/08/2022 - 08:49

    First time I attended an auction with a friend who was in the market. There was only 1 bidder and whole auction was between that bidder and vendor. I laughed my ass off. What a stupid concept and what an idiot the bidder was. I would have shut my mouth after the first vendor bid and negotiate on the side instead of playing the agent's game.

    • Jono05 on 11/08/2022 - 12:04

      Vendor only gets one bid. Don’t know what you’re talking about.

      • KaTst3R on 11/08/2022 - 13:10

        It was more than 10 years ago in Victoria. I dont know if the rules are different now.

  • idonotknowwhy on 09/08/2022 - 09:33
    +2

    I didn't even know this practice was illegal. They do it all the time.
    2 weeks ago I watched an auction. Range was 840k - 890k.
    After the blah blah about how wonderful the place is, the opening bid was $900k!
    Nobody was interested and it passed in.

    • ripesashimi on 09/08/2022 - 10:58
      -1

      That's only 7.1% so its legal.

      OP's example is 14.2%.The moronic agent is willing to risk his license just to sell off 1 apartment.

  • gromit on 09/08/2022 - 09:35

    It is underquoting, but it does seem to be underquoting within the rules. basically never trust an agents quote anyway, always do your own research of the area and prices.

  • mrvaluepack on 09/08/2022 - 10:25
    +1

    Welcome to the property market in Australia!

  • whitepuma on 09/08/2022 - 10:59
    +1

    i'm not sure if it's underquoting, but i think the real question comes into where does the price guide come from?
    Playing the devils avocado, if the price guide comes from the realtor based on other property sales in the area, i wouldn't say it's underquoting as the seller didn't set it.

    But if the seller asked for it to be 700-770, then made their minimum offer of 800, that's a bit dodge (but might not be illegal).

    I do know however, from personal experience, that when you are a seller going to auction, the auctioneer actually asks you ON THE DAY what your minimum figure is, in other words, you can say whatever you want at the time of listing the property, but then on the day of auction you can say something different. This happens alot for various reasons, such as but not limited to:
    - Maybe a nearby property sold since your ad went up that makes you re-evaluate the value of your property
    - Cold feet
    - Getting other opinions
    - Not getting enough registered bidders, so you aren't happy with how the auction will go, so you prefer it get turned in rather than sell.

    Goodluck with your property search, it's a tough market, I've been there first hand and i know it can be a stressful time involving plenty of hair-loss and compromise.

  • Nebargains on 09/08/2022 - 11:01
    +1

    Honestly, I have never understood why underquoting gets everyone so worked up, if everyone does it, why does it matter? Just factor it in to your search for a new house.

    Underquoting was an issue when I bought my first house in the early 2000s, it was still an issue 10 years later when I last moved and it is still an issue now (although nowhere near as bad!).

    If your limit is $750k you really need to be looking at places that are advertised at $650-700k.

    • SydStrand on 09/08/2022 - 22:17
      +4

      Honestly, I have never understood why underquoting gets everyone so worked up, if everyone does it, why does it matter? Just factor it in to your search for a new house.

      Not everyone thinks this way, nor should they. Buying a house is a rare experience for most people (and not in a good way) so they're not exactly practised at it. Plus, no other product on Earth sells this way. You don't buy a TV by scoping out a price range, make an offer, and get knocked back because JB secretly wants more than the advertised price, then engage in a bidding war against the vendor. It's a weird process designed to be as opaque and unintuitive as possible.

      List prices should be just that, a spread of prices the property should plausibly sell for, and it's a shit deal when normal people set a budget, and spend every Saturday rolling up to auctions only to see the top end get blown out by the opening bid. Underquoting is a scummy business that ends up wasting a lot of peoples' time.

      • Craze on 10/08/2022 - 22:46

        Very logical answer, along with this comment that highlights under-quoting is shady business, full stop. Just because it's a common occurrence doesn't make it right, particularly in purchase of properties that is a very costly one.

  • ribze1 on 09/08/2022 - 11:04
    +5

    Had a similar situation on a unit, price guide of $670 - $730k. We offered $690k, knocked back. Upped it to $700k, knocked back and we stayed firm.
    The REA came back to us weeks later and said the seller will accept $720k. We still said $700k was our best offer, the unit didn't sell for months. I calculated that the lost rent and agents fees would have been $10k or so, so the greedy vendor went through all that hassle to make an extra $10k, not to mention they bought it for $400k 7 years prior.

    If anything below $700k was not even in the ballpark then it shouldn't have been given as the ballpark.

    • KaTst3R on 09/08/2022 - 13:49
      +2

      Imagine if everything had a price guide.

      Loaf of bread at woolies $1.50 to $4.50. Bring bread to counter and offers $2.50. Woolies says "Sorry will only sell at $4".

      • ribze1 on 09/08/2022 - 13:50
        +1

        Gold. A great way to highlight how unreasonable it is.

      • Miss B on 09/08/2022 - 14:54

        That's where you say "No worries, I'll find something else" and leave it where it is and walk out. Same goes for a house though, just walk away.

        Vendor rejected a reasonable offer on a property I was interested in. I'd been planning to offer lower before the agent mentioned the higher offer that had been rejected. Still available 2.5 weeks later. They contacted me about a week ago to see if I would make an offer, I told them I wasn't going to pay as much as the vendor wanted. They asked me to offer a bit more than the rejected offer and I said "nah". Lots of new places on the market since then, it's moved way down my list. I wouldn't even pay what I would have a couple of weeks ago now.

  • Awoke on 09/08/2022 - 13:40

    Apart from the time wasting, the agents aren’t forcing you to bid

    • Cluster on 09/08/2022 - 15:06
      +5

      The problem is bidders pay for inspection reports. There's a real cost to real estate agents wasting everyone's time.

      The estimated price should be the minimum the vendor is willing to take. You bid that and there's no competition, it's yours. Not this silly game of 'we wanted this price, but now all of a sudden we don't. Will you pay $100k more than we wanted?'

  • SlavOz on 09/08/2022 - 15:23
    -4

    Yes, you were duped but what's it going to achieve by dobbing in the seller? Are you hoping they'll be strong-armed by the government into selling at your offer price, or is it just an act of resentment because you didn't get your dream home?

    No point wasting time and money grudging over it. Just move on and don't trust the agent in the future. What do people expect when they unconditionally keep doing business with these dodgy agencies?

  • hasher22 on 09/08/2022 - 17:13
    +1

    Property needs way more regulation and policies, unfortunately, the older generation benefited from it and is unwilling to change such dodgy practices.

    Off topic: A unit on ground floor of my unit is selling for 650k (sellers asking), I offered 600k and hoped they would budge to maybe 625k but didn't. Though the unit sold for 715k in 2016, so they are losing money either way.

  • brawndo on 09/08/2022 - 18:19

    Give it a few months.. these numbers will be considered overquoting

  • Heaps for Cheaps on 09/08/2022 - 20:07

    This reminded me of a story back a few years ago… The ultimate 'OzBargain Premium Member-only' deal…

    A homeowner in Melbourne had his house repossessed by the sheriff for total unpaid debts of 104.5k… The house had an estimated value of $630k at the time.

    The sheriff then held an auction, where the top bidder paid $1000, beating off a $200 bidder.

    Now that's over quoting.

    • serpserpserp on 10/08/2022 - 09:04

      No way and property in Melbourne sells for one thousand dollars only. And when the sheriff sells, they put the property on the market to cover the outstanding debt and expenses usually.

      • Heaps for Cheaps on 10/08/2022 - 12:50

        Yep, it happened. December 2011, Braybrook, Melbourne.

  • Fatnashreturns on 10/08/2022 - 00:33

    Typical gorillas in a suit (real estate agents) what do you expect.

  • THICKnSLOW on 10/08/2022 - 08:37
    +2

    Real estate agents are grubs, the good ones are hard to find or leave the industry.

  • serpserpserp on 10/08/2022 - 09:01

    The easiest way to change this is that in the law make it that the property has to go on the market between the advertised range. It can be the very top, but has to otherwise it is misleading.

    I guess the problem is that then everyone then knows what the minimum price definitely is, and that works against the seller

  • FlyingMiffy on 10/08/2022 - 10:28

    Property is worth what someone is willing to pay for it. The quoted ranges is a buyer guide and the reserve is the seller expectation. You don't have to buy for 840K and they don't have to sell for 750K. The angst only happens if you treat the guide as the outcome.

    • THICKnSLOW on 10/08/2022 - 10:45
      +1

      So why attract buyers who cannot afford to pay what the seller wants? It's wasting peoples time.

      • Cartmanizm on 10/08/2022 - 11:06

        More people at the auctions creates a better vibe and achieves a better selling price.

  • Trying2SaveABuck on 10/08/2022 - 12:11

    Almost every property that goes to 'auction' in Sydney and/or Melbourne is under quoted - RE use this as a way to 'build' a crowd

    I dont think i have been to a auction where the reserve was in the bottom half of the advertised price in my life but i have been a number of Auctions were the reserve was well above anything advertised

    the issue is 'proving' it can be almost impossible

  • Dose Pipe Sutututu on 10/08/2022 - 14:45
    +1

    I reckon go back in writing now with a formal offer of $700k, too bad so sad they didn't take the $750k bid.

  • Drakesy on 10/08/2022 - 17:00
    +1

    Lol
    When markets don't meet the owners expectations
    Fcuk em up

  • quasio on 10/08/2022 - 19:25

    yeah when we were trying at it's peak a fair few yrs ago, it was tough, every property was underquoted 200-400k. it was super frustrating.. u bid.. and ur out instantly as everyone continues bidding 200-300k more.. but it was consistent, so we moved our filter down 200 - 300 to meet that underquote..
    that worked well and it stopped wasting our time..

    Although i did see a few auctions where the buyers were super stressed out, and bidding on money u knew they couldn't afford so i guess in that aspect this "trick" worked.

    I do believe underquoting will bite them now, and auctions itself as well, since there's hardly any buyers anyway.. hold steady on your comfortable number, there'll always be another.

  • Lockieasy on 10/08/2022 - 21:04

    I don't think I've attended an auction that wasn't underquoted. The auction I ended up winning back in 2019 was underquoted by $120k which wasn't too bad considering some were underquoted double that.

  • beyondtool on 10/08/2022 - 23:06

    Had a similar NSW auction experience. Bids went to $590,000 the top three bidders were talked to separately and we said we would be willing to pay up to $620,000 with bank approval which was in process at the time. The seller wanted over $700,000 which all the bidders thought unreasonable.

    It went back on the market for a few months until someone was dumb enough to pay $750,000.

    In the meantime we moved on and found a much better place at a more reasonable price which we bought because we were ready. I’d chalk this one up to experience and leave the games for someone else. There’s ALWAYS another home out there…

  • cnrmlj on 11/08/2022 - 06:58

    So what if it's underquoting? What are the consequences? They aren't going to sell it to you for the price you want anyway.

    We had a similar situation last year. Advertised $750-$800, we made a couple of offers in that range and the place sold for $815. What can i do? Nothing. Moved on and bought something else.

  • Zetrox2k on 11/08/2022 - 10:07
    +2

    We went through almost the exact same scenario in mid December.

    Property was advertised at 720k-770k, 7 bidders including ourselves turned up, and we won the auction at $870k - thats 100k above their top end estimation.

    We got taken inside the house at the end of the auction, where the agent comes and sits with us and says "we need to push a little higher".

    "how much higher?"

    "950k is what the owners are asking."

    thats 180k above their top end estimation.

    We stood firm on our 870k offer, lost the property, and we found another property we fell in love with a few months later… dont be discouraged.

    Apparently when we challenged them about it they said that the owners had not given them an on market figure until midway through the auction. Consumer affairs said that it may very well have been the case, and it is almost impossible to prove otherwise, placing them in the clear.

    • Jono05 on 11/08/2022 - 12:07
      +1

      You didn’t win the auction because the property didn’t sell. You were just the highest bidder.

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