Biggest case of underquoting was this week's episode of the Block.
How can properties with reserves of $1.3m sell for over $2m? (Or were they quoting numbers well in excess of the reserve to prospective buyers just to ensure that the contestants were in the black?)
Cant be underquoting if the reserve is 1.3M.. Supply and demand.
If I decide to sell my house with a reserve of $1 I can guratee you it will sell for ALOT more than my initial reserve. Would that mean I underquoted it?
As theoricatlly it could sell for $1, not my fault buyers saw better value in it and used their own DD to determine the price.
Same as I could also set reserve at $10M it wouldn't sell and no buyers would turn up or some people would turn up to see what it actually sold for.
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When buyers buy a TV, car or whatever buyers will spend more time researching about it features (in house terms beds, baths, cars etc) the brand (suburb), warranty (structure of the building) and compare price (sold prices) and then make a determination on which one to buy or what they are willing to pay.
If I tried to sell you a brand new Mazda 6 with leather seats, climate control, etc etc and 5 year warranty for $150,000 would you buy? At this price point you would consider a BMW instead, better brand, technology etc.
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Yet when it comes to buying a house some people want to be spoon fed and expect everyone to tell the truth yet they wont. I told the REA I cant afford much more than 500k for a property worth mid 500s. Yet I had over 200k in cash sitting in the bank and easily could service 800k. I bought the property for 510k way below what my valuation mid 500s and the banks valuer I had done before auction was 530k. I in a way felt sorry for the vendors as I was easily going to pay 40k more (and in private sale probably would of put an offer of 550k) However attended the auction no interest, refused to go inside so I could see everyone had left so I knew I was in a position of power.
However I didn't go in and tell the vendors I would of paid a further 40k more easily (which is the truth) as I was better at the game then both them and their agent.
Later that afternoon a house in the same street sold for $447,500 but was unrenovated, was only 3 bed 1 bath compared to 4 bed + study, 2 bath. The extension the previous vendors did was easily 60k (added 2 bed and 1 bath) which adding to the 447k = 507k total and this doesn't include the reno to the bath, kitchen or rest of the house.
TLDR
If you cant work out what a property is worth maybe you should hire a BA as the vendor has hired their own selling agent and everyone including yourself the buyer will be telling lies.
Please note I do not represent any BA but if you don't have the skills and want to save 5-10k by not hiring an expert on a 500k purchase then you deserve what is coming for you...