Auction – Under quoting
Auction under quoting by real estate agents which involves estimating a selling price well under the market value of the property in the lead up to an auction has been a problem in Australia for many years. A recent investigation by the NSW Office of Fair Trading revealed prominent Sydney real estate agents were guilty of this and last weekend 11 Sydney agencies were fined as a result of the auction price of a property being greater than 20% of the minimum estimated selling price quoted to a potential purchaser.
There is a feature article in last weekend’s Sydney Morning Herald which highlights some of the real estate agents who were fined by the NSW OFT. All of these agents were up in arms about being fined and many other agents across NSW would be hoping they do not receive a phone call from the OFT. However, this was welcomed by many potential property buyers who are sick of being misled and having their time wasted at auctions they will never be successful at.
Some may ask why agents do this? The reason is that the more people an agent can get to a auction then the more chance the property will sell for a greater price. It has been suspected that agents deliberately underquote the estimated selling price of a property to encourage potential buyers to turn up to the auction and place bids.
Many of these hopeful property buyers who turn up to an auction are already at the top end of their budget. As soon as the auction starts their budget is blown and they are out of the auction. They have wasted their time and the property has come in over 20% more than what the agent estimated.
It’s great to see the OFT get more involved in regulating the practices of real estate agents and trying to improve the image of the industry.
Comments
I read this article in the SMH the other day. About time the regulators cracked down on this behavior by real estate agents. I have experienced this first hand.
I’d found this property in Cronulla 3 years ago so i went to a property inspection to see the property. I asked the agent what he though the property would sell for at auction and his reply was around $500k to $530k. I thought it was quite reasonable so i attended the auction.
The opening bid of the auction was $450k which the auctioneer said he could not accept. This shocked me as i thought the auctioneers responsibility was to accept all registered vendor’s bids. ANyway the vendor eventually made a bid at $480k which was accepted.
Five minutes later a bid had broken through $600k and the auction ended around $653k. This is 30% more than what the agent quoted me.
I inspected a few more properties and got the agents expected sale price. I than checked in with what the final auction price of the property was and they were all much greater than what i was quoted.
That was it for me i didn’t go to another auction and fortunately enough i didn’t purchase a property which is great considering prices have decreased since then!!!
Micky
07.06.08
4:11 pm
Thanks for sharing your experience Micky.
I think there would be a lot of property searchers who experienced exactly what you have experienced. With the way the market is going under quoting will probably continue but it is likely to be less noticeable because there are a lot less people at auctions and a lot of properties are closing in and not reaching the reserve price.
Rodney Munch
09.06.08
4:11 pm
It’s amazing what agents will do for a sale, i have never purchased a property but i will be looking out for this if i ever do…….
T-Bone
13.06.08
6:44 pm