Underquoting and jaded buyers
- Thread starter Jacque
- Start date
My thoughts exactly.
People just go stupid at auction.
The only time I've had success at auction was when it was a mortgagee auction, and it was a while ago when everyone was saying the property market was going to keep falling and no one wanted to buy. Purchased at Auction for $370k, spent maybe $30-40k on it (incl stamp duty, etc..), just valued by the bank at $540k. But there is no way I could get the same result in today's market.
yes agree, todays market for renos is simply silly,
I honestly blame it all on those renovation rescue programs
Straw hats in winter!! Well done.
I've attended a few Mortgagee Auctions in the past, hoping to get a cheap IP.
They all sold for pretty much market value
Would love for the magazines to do articles such as "why buying in a hot market is a financial disaster"
or
"I bought a property after watching "the block" and overpaid, warning"
or
"Do not think you can do a structural renovation over two weekends, and expect to make $100k"
or
"I bought a property after watching "the block" and overpaid, warning"
or
"Do not think you can do a structural renovation over two weekends, and expect to make $100k"
But you can; I saw it on tv.
I went to an auction a few weeks ago in melbourne Eastern suburbs.
There were 2 sub-divided blocks being sold at auction one after the other. Each were 272m2 with plans and permits for 3br DS townhouse.
Anyway, was advertised at $160k plus. (Prices of about 5 years ago) so I rang the agent and asked him the expected price and he wouldnt tell me, just kept asking how much I would pay.....
Didn't tell him how much I was willing to pay (which was $220k) but I told him I thought the would sell for around the $240k mark and laughed at his $160k+ and told him he was way off the mark and that he knows it...
Lot 1 sold at auction for $272k
Lot 2 sold at auction for $258k
Excellent result for the vendor, not so good for 55 out of the 60 people at the auction who were probably out bidded by the third bid.
Tim
There were 2 sub-divided blocks being sold at auction one after the other. Each were 272m2 with plans and permits for 3br DS townhouse.
Anyway, was advertised at $160k plus. (Prices of about 5 years ago) so I rang the agent and asked him the expected price and he wouldnt tell me, just kept asking how much I would pay.....
Didn't tell him how much I was willing to pay (which was $220k) but I told him I thought the would sell for around the $240k mark and laughed at his $160k+ and told him he was way off the mark and that he knows it...
Lot 1 sold at auction for $272k
Lot 2 sold at auction for $258k
Excellent result for the vendor, not so good for 55 out of the 60 people at the auction who were probably out bidded by the third bid.
Tim
And so it continues again.... more promises to tackle underquoting with Bresic and Whitney in the headlines this time round....
http://www.dailytelegraph.com.au/ne...or-under-quoting/story-fnpn118l-1227262738596
Their examples are tame however when compared to some other recent sales. I still believe the solution is to ensure that the listing agreement estimation is identical to the price guide supplied, and with more clarity and regulation around the + sign on advertised guides. Of course there are always exceptions, with buyers willing to overpay and over and above even the estimation but the problem lies between what price the selling agents are estimating to sellers and then to buyers. 10% differences aren't uncommon but it's still misleading, deceptive and unfair.
A couple of recent examples:
http://www.domain.com.au/property/sold/house/nsw/pymble/?adid=2011763648
Sold $3.2m Guide provided was $2.65m+
(My estimation was listing agt would have been $2.8-2.9m)
http://www.realestate.com.au/property-house-nsw-castle+hill-118821851#
Sold $1,308,000 Guide provided was $790K+
(My estimation was listing agt would have been $1-1.1m)
http://www.dailytelegraph.com.au/ne...or-under-quoting/story-fnpn118l-1227262738596
Their examples are tame however when compared to some other recent sales. I still believe the solution is to ensure that the listing agreement estimation is identical to the price guide supplied, and with more clarity and regulation around the + sign on advertised guides. Of course there are always exceptions, with buyers willing to overpay and over and above even the estimation but the problem lies between what price the selling agents are estimating to sellers and then to buyers. 10% differences aren't uncommon but it's still misleading, deceptive and unfair.
A couple of recent examples:
http://www.domain.com.au/property/sold/house/nsw/pymble/?adid=2011763648
Sold $3.2m Guide provided was $2.65m+
(My estimation was listing agt would have been $2.8-2.9m)
http://www.realestate.com.au/property-house-nsw-castle+hill-118821851#
Sold $1,308,000 Guide provided was $790K+
(My estimation was listing agt would have been $1-1.1m)
There is no real way around it. Nothing stops someone bidding above a quoted price.
I'm not really sure what the issue is. Obviously someone is willing to pay. How does quoting it a higher price help the person who missed out buy it?
I'm not really sure what the issue is. Obviously someone is willing to pay. How does quoting it a higher price help the person who missed out buy it?
This is certainly true and in any market, there can be buyers willing to pay over market however this isn't the issue here.
It's about quoting it at a price that the vendor is willing to accept and that which usually matches the written estimation provided by the selling agent to the vendor. Quoting a figure under this is misleading and deceptive to buyers.
But the quoting occurs before the auction. The vendor is perfectly entitled to adjust his expectations on the day based on market data, which includes feedback from open inspections and actual bidding activity on auction day.
Put another way, if the agent "over-quoted", would we have an issue with the vendor being willing to accept less than the quoted range if the property passed in on auction day?
At the end of the day, an auction is the fairest and most transparent way to sell these things. The fact that the agent quoted below the sale price or the vendor subsequently revised his expectations is just a mechanic of market forces at work. If buyers didn't think the property was worth that price it wouldn't have been bidded above the quoted range.
It is certainly the right of the vendor to alter the reserve as the sale process proceeds. But surely citing a range below the reserve does not assist anyone, as the majority of potential buyers have a maximum price below the reserve,
Also, if a REA consistently cites a range below the reserve, or the property is sold for well over the range, does not that indicate that the REA is unprofessional and perhaps acting contrary to law? Auctions with dummy bidders are unfair.
Also, if a REA consistently cites a range below the reserve, or the property is sold for well over the range, does not that indicate that the REA is unprofessional and perhaps acting contrary to law? Auctions with dummy bidders are unfair.
The reserve is normally not set until during the auction based on actual bidding activity.
If bidding stays below the range, there is no need to set a reserve because it'll pass in.
If bidding is within the range, the vendor needs to start thinking about whether he/she wants to sell.
If bidding is above the range, presumably the vendor will set the reserve at the high end of the quote, but is perfectly entitled to change his mind at the last minute.
Dummy bidding is a different thing.
If bidding stays below the range, there is no need to set a reserve because it'll pass in.
If bidding is within the range, the vendor needs to start thinking about whether he/she wants to sell.
If bidding is above the range, presumably the vendor will set the reserve at the high end of the quote, but is perfectly entitled to change his mind at the last minute.
Dummy bidding is a different thing.
I can't see what the issue is. So the agent quoted $1.05mil and it got sold for $1.07mil and the vendor's expectation was $1.1mil. So what?
At the end of the day a buyer should make up their own mind about what they think the property is worth and not go off what the agent is saying.
The agent is obviously working for and employed by the vendor.
I think some people need to take their dummies out and toughen up.
Dummy bidding though is a completely different story.
At the end of the day a buyer should make up their own mind about what they think the property is worth and not go off what the agent is saying.
The agent is obviously working for and employed by the vendor.
I think some people need to take their dummies out and toughen up.
Dummy bidding though is a completely different story.
Astute investors can pick quite quickly when a property is being under quoted by doing their DD and comparative sales research.
The Vendor is only concerned with getting the best possible outcome for themselves.
Under quoting seems to bolster numbers of prospective buyers, and REA's hope that among these prospective buyers are several emotional bidders which in turn pushes up the price, making the Vendor happy and the Agent as they receive a greater commission.
The Vendor is only concerned with getting the best possible outcome for themselves.
Under quoting seems to bolster numbers of prospective buyers, and REA's hope that among these prospective buyers are several emotional bidders which in turn pushes up the price, making the Vendor happy and the Agent as they receive a greater commission.
Agreed. It's frustrating you can't buy at the price you want. But that's free market.
If you over-regulate, all that will happen is sales will be undertaken by private tenders with no official deadlines and your offer will be shopped around longer, which would work against you.
Of course, we can regulate that too. But in that case we might as well pass a legislation that says properties can never sell above council valuation.
If you over-regulate, all that will happen is sales will be undertaken by private tenders with no official deadlines and your offer will be shopped around longer, which would work against you.
Of course, we can regulate that too. But in that case we might as well pass a legislation that says properties can never sell above council valuation.
Its the Heartstring - home buyers I feel sorry for the most. They will bid to their last dollar if they've fallen head over heels for a property (and already spent into the thousands on pre-auction due diligence reports etc.).
We as investors should (hopefully, but not always!) Be wise enough to never over bid or over pay to the true market value of a property, in am auction environment.
We as investors should (hopefully, but not always!) Be wise enough to never over bid or over pay to the true market value of a property, in am auction environment.
True but home buyers are buying a consumer item as much as an investment. Is there a price to one's home?
I think a lot of people just get dirty because they have to waste money on building a pest, solicitor etc prior to the auction and then they never really had a chance anyway. I reckon the building a pest system needs an overhaul. It should be provided by the vendor and make them all to the exact same format. A lot of this wouldn't be an issue then i reckon.
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