Clear Underquoting by REA, Not Even Bothering to Hide It Any More

soan papdi on 17/06/2023 - 22:43

https://www.consumer.vic.gov.au/housing/buying-and-selling-p…
Underquoting
It is illegal for an agent to advertise or advise you of a price that is less than:
- the seller's auction reserve price or asking price
- a price in a written offer already rejected by the seller on the basis it is too low, or
- the agent's current estimated selling price.

https://www.theage.com.au/property/news/incredible-cheltenha…
- The home was listed for sale with a quoted price guide of $2,425,000 to $2,475,000 by Buxton senior manager Andrew Chisholm and had a reserve price of $2.5 million.
- “It started at $2.5 million, and it was straight on the market with one bid,” he said. “The guy who ended up buying it, from Thornbury, just did not want to give it up.”

Clearly this is underquoting. Simple solution is to state the reserve in the ad at least two weeks prior to auction. Saves everyone time but I'm just dreaming if any action will be taken in favour of consumers.

Financial

Comments

  • Almost Banned on 17/06/2023 - 22:49
    +7

    If they knew the property would not be sold at the advertised price, then they clearly breached the ACL.
    Good luck getting anyone to do anything about it.

    • Jimothy Wongingtons on 18/06/2023 - 08:51
      +1

      Yep been happening for years, the market is f***** and REA are laughing all the way to the bank with their rmw cc feet on the desk, 8am monday mimosa in hand and leased amg in the driveway.

  • jjjaar on 17/06/2023 - 22:53
    +3

    the seller's auction reserve price or asking price

    The vendor often doesn’t decide this until the day of auction. They could be willing to accept 2.425 when they list, but if enough interest comes through, they might raise their expectations and therefore raise their reserve.

    • soan papdi on 17/06/2023 - 22:55
      -2

      The vendor often doesn’t decide this until the day of auction

      I find that highly improbable. Even if it's true, it's unreasonable to expect buyers to be caught unawares by a seller's last minute change of mind. If the buyer seller can't fix a reserve price a few weeks ahead of time, then postpone the auction.

      • jjjaar on 17/06/2023 - 23:09
        +2

        The vendor can do what they want. It’s still their property. If enough people don’t think it’s worth the reserve, it’ll pass in. If buyers bid over the reserve and the property sells, then does it really matter if the reserve was lower anyway?

        • soan papdi on 17/06/2023 - 23:23

          If enough people don’t think it’s worth the reserve, it’ll pass in.

          That would make sense if REAs disclose the reserve ahead of time. We never find out unless bids cross the reserve and the property is declared to be on the market. How's that fair for the buyers?

          • RockyRaccoon on 18/06/2023 - 08:10
            +3

            @soan papdi: Just think.

            You're selling a car, computer etc, you get 30 phone calls asking about it, you realise you can get more. What do you do?

            Like jjjaar has indicated, but put a little differently

            They have a house listed, 30 people go thru, a number call for contracts. The agent asks you to set the reserve.

            Oh lets set it below the quoted price?
            Oh lets set it at the quoted price?
            Oh lets set it higher than the quoted price?

            To me I am not in the market to make it cheaper at my expense.

            Take the agent to court. You might be surprised when the selling contract with the agent shows that seller's selling price at the time this contract was written, was exactly what the agent quoted you. Nothing in the contract means they MUST accept that or make that the reserve price.

            Meaning THAT does NOT mean the seller has to stick to that price.

            You are asking for a change in the law, to say that the SELLER must stick to the quoted price, not the agent.

            Even after that we are talking about about estimate that was only a very small percentage off the reserve price you were quoted. 1%

            Like all supply and demand. Who knows what its "exactly" worth until an auction starts. No two houses are exactly the same, not like a box of cornflakes. 10 people show up on one day 5 the next. Just like when you are at the supermarket. 10 show up to the checkout at the same time you want to check out.

            • soan papdi on 18/06/2023 - 08:29

              @RockyRaccoon:

              To me I am not in the market to make it cheaper at my expense

              Surely not. As a seller I would want the best price possible. Set your reserve as high as you like.

              Like all supply and demand. Who knows what its "exactly" worth until an auction starts.

              It’s almost like the agent never knows the market at all. It’s always an unknown and they’re always caught by surprise. What exactly are they contributing to the process then?

              Even after that we are talking about about estimate that was only a very small percentage off the reserve price you were quoted. 1%

              In this situation it’s tiny but we know it’s much larger in many cases.

              Now look at it from the other side. As a buyer I have limited budget and limited time to get a house. Only so many days a week when I can attend an auction. I see a house advertised within my budget, run a check on the property and it looks fine. I attend the auction only to find out the reserve has been set far higher than the advertised price. How is that fair? The laws as they stand now favour the seller.

              If I set the reserve low, interested buyers are not going to stop bidding. They’ll still try to outbid and get the house but at least they know they’re in with a fair chance. Right now it’s all at the whim of the seller who can waste everyone’s time with no consequence.

              • popcornready on 18/06/2023 - 12:05
                +1

                @soan papdi: I find this hilarious

                You say you don’t have time, because inspections take time etc etc.

                Do you not do your own research on what a property is worth? It’s probably your biggest purchase in your life and you rely on an agents guide?

                So you are wanting a system where an agent (who no one trusts) set a price guide that you will accept as gospel?

                • soan papdi on 18/06/2023 - 12:15

                  @popcornready: I never said I don’t have time. I said I have limited time and there’s only so many inspections and auctions a family can attend.

                  It’s probably your biggest purchase in your life and you rely on an agents guide?

                  I find this hilarious. You’re telling me I need to do the agents job and estimate prices for myself? Then why even have an advertised range? Just list the house.

                  So you are wanting a system where an agent (who no one trusts) set a price guide that you will accept as gospel?

                  Please read the post again. This is about underquoting. If the seller expects a minimum price, the advertised range cannot be lower. It’s already the law.

                  • popcornready on 18/06/2023 - 12:19

                    @soan papdi: Yes, for such a large investment you do the job to understand the market price.

                    It’s like investment in funds etc. they provide an expected return, dont tell me you blindly believe it?

                    • soan papdi on 18/06/2023 - 12:20

                      @popcornready: They’re nothing alike. House purchases are a point in time transaction. Investments in the market are about long term predictions, which no one can promise.

                      • popcornready on 18/06/2023 - 12:21

                        @soan papdi: So an agent has a crystal ball to know 5 weeks from the auction when they set the guide about who will turn up and how the market will perform?

                        • popcornready on 18/06/2023 - 12:22
                          +1

                          @popcornready: No one is saying agents don’t underquote. They certainly do

                          But in this instance that you are so upset, is not really a good example at all

                          • soan papdi on 18/06/2023 - 12:53

                            @popcornready: In this instance, we have an agent admitting the reserve is higher than the advertised price. It’s illegal and happening all the time and there’s no enforcement. What’s wrong in being upset at this situation? In fact I’m surprised more people aren’t upset and asking for a change in the way houses are sold.

                            Yes I’m aware the agent can claim the reserve changed last minute and it’s all about the unexpected interest in the market etc. doesn’t change the fact that this is an unfair playing field.

    • JimmyF on 18/06/2023 - 10:29

      The vendor often doesn’t decide this until the day of auction

      We all know this is a total lie but it is what agents keep saying to cover their arse legally from the under-quoting laws.

      No seller would enter an agreement for an auction with an agent without discussing expected price for sale.

      • jjjaar on 18/06/2023 - 11:00
        +1

        Expected price yes when they first list it, but they change their mind last minute about what the reserve is.

        I have a friend who just sold their place. They agreed they’d be happy to get 650-700, the property was listed with that guide, but because of all the interest during the promo period, on the day of the auction they set the reserve at the 700 amount. Yes, still “within” the guide, but they no longer would have settled for less than the 700 and were willing to pass it in and wait if they had to.

        • JimmyF on 18/06/2023 - 15:08

          Expected price yes when they first list it

          So listing a property for less than this 'expected' range is under quoting. As underquoting clearly says it is a price the vendor won't accept.

          on the day of the auction they set the reserve at the 700 amount

          Your example says they set the price in their first expected range, so if the agent listed it less than $650k it was under quoting.

          Setting a reserve at $700k is fine if the SOI was $650-700k, it isn't fine if the range was $600-650k as it what normally happens.

          Spin it how you like, the buyers all know the game and how it is played. Its just laughable that the agents think we are dumb sheep and the reg bodies are asleep at the wheel.

          • jjjaar on 18/06/2023 - 15:10

            @JimmyF: But who is to say all the other times it isn’t in the vendors first expected range, and the vendor hasn’t changed their expectations on the day of auction?

            • JimmyF on 18/06/2023 - 15:12

              @jjjaar:

              But who is to say all the other times it isn’t in the vendors first expected range, and the vendor hasn’t changed their expectations on the day of auction?

              Spoken like a true REA……

              • jjjaar on 18/06/2023 - 17:54

                @JimmyF: No. I’m speaking like a person that is going off talking to friends who have sold property, and how they’ve changed their mind.

                If you honestly think it’s the REA lying 100% of the time, you’re delusional. Of course underwriting happens. I’ve never disagreed with that. But you’re completely ignorant to vendors changing their mind.

                • JimmyF on 18/06/2023 - 17:58
                  -1

                  @jjjaar:

                  If you honestly think it’s the REA lying 100% of the time, you’re delusional

                  LOL REA are endlessly lying. Delusional people are the ones that believe they are not.

                  I’ve never disagreed with that. But you’re completely ignorant to vendors changing their mind.

                  Ignorant people believe that near 100% of people change their mind unexpectedly on Auction day.

  • Shadowsfury on 17/06/2023 - 22:55
    +1

    no surprise

    so many auctions I've attended lately its only been declared on market after its well past the quoted range

    • Mechz on 17/06/2023 - 23:51
      +1

      That's because they want people to keep bidding. If they say it's on the market after the first few bids it will slow everything down.

  • Hybroid on 17/06/2023 - 23:39
    +3

    Seeing this happen all the time…

    • $1.1m guide price.
    • $1.3m auction start.
    • $1.5m final bid…
    • …reserve not met. Auction "passed in".
    • Back on market - auction again in 4 weeks time.

    Absolute waste of people's time and effort.

    There's also another new trend now where they don't give you a guide price but "awaiting feedback". Because, you know, the REA's main job to know the market claim they don't know what's it worth.

    So they'll hold few weeks of viewings and solicit interest/offers from people.

    Then bump up the price couple hundred thousand and start above auction cycle.

    • RockyRaccoon on 18/06/2023 - 08:15

      And if its your house selling, what would you do?

      We arent dealing with eggs from backyard chickens.

      That saying, as a buyer I am also peeved when I have to pay more (Obviously, as a good ozbargainer!)

      If we make the REA the decider of price, imagine how that can be a source of complaints. When the house sells in 5 minutes to someone who doesnt even look at it.

      No one knows, they can only give an indication to both buyter and seller based on comps

      • Hybroid on 18/06/2023 - 09:33
        +1

        The price isn't the issue, it's the deception that's the issue.

        They know full well that the property is worth more than $1.1m and will never sell for that figure or anywhere near that. How is the average joe supposed to know that.

        It's not about paying more, it's about being upfront that it's not going to sell less than $1.3m, $1.5m, whatever and therefore I know & acknowledge it's not in my budget and to move on to another option, rather than being strung along.

        The UK does this well where every house has a predefined set value and none of this auction BS.

  • YoungQuan on 18/06/2023 - 01:44
    +1

    The reserve price gets set at any time before the auction, usually on the day of the auction. The reserve price can also be changed during the auction. The price guide of $2,425,000 to $2,475,000, and a reserve of $2,500,000 is in no way underquoting. It just means that the property was popular during the marketing campaign and most of the buyer feedback was at the higher end of the price range. Consequently, the vendor decided to set the reserve at $2.5m. They could have set at $5m if they wanted to, perfectly legal (but obviously it would not have sold). That's how real estate works, the market dictates the price.

    • soan papdi on 18/06/2023 - 08:38

      The price guide of $2,425,000 to $2,475,000, and a reserve of $2,500,000 is in no way underquoting.

      It’s literally illegal as per the link I posted. The reserve or asking price is lower than what was advertised.

      The seller thinks they have a popular house that’ll sell easily? They want $2.5m? Sure, just state that in the advertisement. Offers below the reserve won’t even be entertained. If the house is truly as popular as they think, people aren’t going to stop bidding at the reserve. The emotions they display now will be in effect, just that some buyers won’t have to waste their time attending an auction where they never had chance to begin with.

      • popcornready on 18/06/2023 - 12:07

        So you want the agent to tell the bloke who bid “sorry mate, can’t make that offer because it’s not within the guide?”

  • SBOB on 18/06/2023 - 08:45

    The home was listed for sale with a quoted price guide of $2,425,000 to $2,475,000 by Buxton senior manager Andrew Chisholm and had a reserve price of $2.5 million.

    Thats a 1% variance above the upper limit.
    If this property was in your budget, it would seem attending an auction for it should come with the expectation that going over budget by 1% is incredibly likely.

    If the property had sold for 2.5 (which I assume was in your budget) would you still be unhappy? Or its more because someone else bid it much higher and therefore valued the property higher?

    • soan papdi on 18/06/2023 - 08:53

      1% variance is not the point. The point is the agent admitting the reserve being higher than the advertised price. The law is clear that this is not permitted.

      I was not involved in this auction. However I have been in many situations where the reserve was much higher than advertised. It’s not a fair market where the rules favour one side (the sellers) so heavily. This is why I’m asking for a reserve being advertised ahead of time. If the seller is being greedy, no one is going to show up. If the reserve is too low, it’s on the buyer if they commit to bidding for the house and waste their own time.

      • popcornready on 18/06/2023 - 12:08

        How do you know what the reserve was if the first bid was $2.5 and after they bid it was on the market.

        The reserve may have been $2.4m for all you know

        • soan papdi on 18/06/2023 - 12:09

          Because the agent said so. Did you read the article?

          • popcornready on 18/06/2023 - 12:12
            +1

            @soan papdi: Wow. $25k over top of range

            For all you know, instead of 2 expected bidders they had 5 turn up and owner changes their decision

            It’s their property, they can do as they wish

            • soan papdi on 18/06/2023 - 12:19

              @popcornready: You’re changing the discussion when I point out the facts. Like I’ve mentioned multiple times, this is not about 1% or 25K more. Underquoting is illegal. The advertised price was lower than the reserve.

              • popcornready on 18/06/2023 - 12:20

                @soan papdi: And many have pointed out that the seller can do as they wish.

                In fact, and you may be shocked to learn, on the day of the auction the seller can just decide not to sell their property at all!

                • soan papdi on 18/06/2023 - 12:22

                  @popcornready:

                  In fact, and you may be shocked to learn, on the day of the auction the seller can just decide not to sell their property at all!

                  Oh how nice of them. Screw the buyers who come prepared to spend if only they knew what the minimum was ahead of time. Oh the poor sellers.

                  • popcornready on 18/06/2023 - 12:23

                    @soan papdi: It’s not your property! They can do as they want with it

                    Entitled much

                    • soan papdi on 18/06/2023 - 12:25

                      @popcornready: No mate, I’m just asking for a level playing field. Buyers shouldn’t be treated as second class citizens in the system which heavily favours the sellers. False advertising and underquoting are already illegal, it’s the enforcement that’s lacking.

                      • popcornready on 18/06/2023 - 12:29

                        @soan papdi: Haha mate, do your research and you won’t have an issue.

                        It’s simple

                        And guess what, no one is forcing you to bid

                        I’ve already not had a few situations where my research has failed me, and it’s something no one can plan

                        I.e guide was 1.8-1.9, two similar properties within 800m sold for 2.2/2.3 within two weeks. It was a hot market and I planed that I would buy for $2.3, but expected it may land $2.4

                        Opening bid was $2.6 and ended up at $2.9

                        No one could have predicted that.

                        • soan papdi on 18/06/2023 - 12:32

                          @popcornready: I’m sorry that happened to you and yes I’ve been outbid many times too. But that’s the point. If your seller had advertised his reserve, it would have saved you effort. You could have pursued other properties with the limited time you have. That’s basically my argument here. Tell me the minimum you want and let’s go from there.

                          • popcornready on 18/06/2023 - 21:23

                            @soan papdi: Nothing to be sorry about.
                            Can’t predict someone wanted to pay $700k more than properties nearby.

                            It’s just the way it is. Not worth complaining over

  • JIMB0 on 18/06/2023 - 09:04

    Call the agent tell them you want the property. Ask them what price the vendor wants and if they'd be willing to put it on a contract.

    • soan papdi on 18/06/2023 - 09:09

      I’m sure the agent will give me a clear answer about expected price. Haven’t met one yet who hasn’t asked me in return yet what I’m willing to pay and change the conversation.

      • JIMB0 on 18/06/2023 - 12:26

        Turn it around on them. Get them to give you a price they'd be happy to sell for. Tell them you won't be attending the auction.

  • tsunamisurfer on 18/06/2023 - 10:48

    One of the key tenets of Auctions is the Reserve price is secret. Would the OP like for the auctioneer to require every buyer to carry a sign with their max bid?

    Is the OP really bitching about 25k difference between range and reserve on a $2.5m sell?

    • soan papdi on 18/06/2023 - 10:55

      One of the key tenets of Auctions is the Reserve price is secret.

      Sure but it can’t be below the advertised price range. That’s literally the law.

      • YoungQuan on 19/06/2023 - 09:31

        wrong, you obviously have no idea. Reserve can be set at any price point the owner wishes, the price guide is only an expectation of what the agent and vendor feel it is at the start of the marketing campaign, it just needs to be adjusted in line with market feedback and owner's expectations. The agent could have had no interest in the property for 3 weeks before the auction, and then a day before the auction might get a couple of interested parties who are really keen on the property. It happens all the time.

        The owner can also change the reserve at any point as well, including during the auction. They could set the reserve at $2.5m, get bids well over it and then decide not to sell for less than $3m.

        Real estate has its own legislation, this is not your normal retail consumer purchase from the shop. In real estate nothing is legally binding until the contracts are signed and exchanged.

        • soan papdi on 19/06/2023 - 09:49

          They could set the reserve at $2.5m, get bids well over it and then decide not to sell for less than $3m.

          How anyone can think this is acceptable behaviour in a commercial transaction is beyond me.

          Real estate has its own legislation, this is not your normal retail consumer purchase from the shop.

          Houses are a commodity like anything else. It's absolutely ridiculous that we have such lax laws that allows sellers to misbehave. Buyers have rights too and shouldn't strung along just because the seller changes their mind midway.

          In real estate nothing is legally binding until the contracts are signed and exchanged.

          Not for the buyer of course. Winning the auction is an unconditional acceptance to purchase the property and they have to legally pay the deposit or go through hell to get out of the situation. How is this even remotely acceptable?

        • freefall101 on 19/06/2023 - 10:12

          the price guide is only an expectation of what the agent and vendor feel it is at the start of the marketing campaign

          There are legal requirements around this amount.

          From the original post

          Underquoting

          It is illegal for an agent to advertise or advise you of a price that is less than:

          the seller's auction reserve price or asking price

          If the reserve was changed on the day then that’s fine, but the REA would want to make sure that’s well documented and clear that they were never underquoting.

  • pharkurnell on 18/06/2023 - 10:49

    Sore loser?

    • soan papdi on 18/06/2023 - 10:50

      I was not involved in this auction. This is about underwriting. Not my loss. Can’t we just state something without it being a personal incident?

  • TEER3X on 18/06/2023 - 12:21

    A bit off topic but where I've been looking in VIC, some houses are going 100k-150k over expected range, and range is 650-750k.

    • soan papdi on 18/06/2023 - 21:11

      Unfortunately, this has been true for ever in Melbourne.

  • echelon6 on 19/06/2023 - 10:51

    This whole underquoting business is trash. You're all adults with free will, it's a free market, go decide what you think it's worth and stop whinging about it. I have no loyalties with agents but I don't think this responsibility should be put on their industry.

    • soan papdi on 19/06/2023 - 11:50

      Yes, we are adults with free will but have no knowledge of what an acceptable price is for the house. Further compounding the problem is that sellers are free to withhold the sale price, so our information on what other similar houses sold for recently is incomplete. All this will make buyers overbid and heat up the already overpriced market.Of course, this is great for sellers.

      However, people spending more on housing means spending less on other parts of our economy (tourism, any form of entertainment, lower investments in small business, etc). This is obviously bad for buyers but also for the overall economy.

      We all know how industries behave when self-regulated, like aussie banks and the recent royal commission finds, oil firms with their spills and investment banks causing housing bubbles, supermarkets with their cartel-like behaviour. There is no true free market without regulation because all it enables is greed to take over.

  • GourmetFoodie on 19/06/2023 - 22:10
    +1

    Welcome to buying a house in this country at auction.
    Saw a property * mid advertising * campaign drop the advertised price range from 1.45-1.55m to 1.3-1.4m. They then pushed the auction out by a few weeks as little interest apparently…. It went to auction and sold for $1.58m.

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