Underquoting???

Hi all, i have had my finance approved for my first IP but im getting soooo frustrated at wasting my weekends going to auctions that have an estimated price range advertised and then the property being passed in for a much higher price. If a property simply gets sold for way over the estimate then i have no problem but the other scenario is getting me angry and im sick of wasting time and petrol. Is anyone else the same or is there anything that can be done?

Last week i received the following information from an agent on an agent-

"Thank you for your enquiry on the above mentioned property. The asking price is $440,000 - $490,000. At this stage we are going to Auction. If you have any further queries please feel free to contact me."

The property got passed in at $557,000 and the paper advertised that the reserve was not met- which was $575,000...

What to do?
 
Maybe you should only go to auctions advertised 20%-30% under the price you are willing to pay?

For us, we only have a policy of going to properties after they are passed in - no surprises there (after all, the reserve is out of the bag...)

Cheers,

The Y-man
 
Hi renomegahan,

Your searches and due dillegence on the property/area you are buying in should give you an indication to the price a house/unit should sell for.

The agents will not tell you the reserve...Many bidders tend to the drive the price up when people get carried away. The agent is working for the Vendor.

Sure there are times when the price is over-inflated, especially in a heated market. However, if this keeps happening to you it seems to me you are not doing your research properly.



Regards JO
 
I thought there was a law preventing underquoting.

$440-490K is no where near $575K

This happened to us. Price range was $200-220. They wouldn't even let anyone start the bidding under $240 so no-one bid. Waste of our time and money.
 
Grrr... I'd be infuriated, too, renomegahn.

It sounds to me like a breach of the law, and I'd report it to Consumer Affairs Victoria.

They may not do anything, but if you don't report it, you're guaranteed that no action will be taken.
 
That practice is now illegal in SA and there are significant fines. But I heard on the radio this morning that the practice was still very widespread in NSW, and maybe also in Victoria. I would report it, not to the Real Estate Institute but to Consumer and Business Affairs, and also, Name and Shame the Agents in forums like this!

Underquoting means that people waste their money on having inspections done, and if auctioned, is simply the means to create a crowd.
 
Was the property advertised throughout the whole campaign at $440-$490k? From my understanding, as long as the advertised price range is within 10% of the vendor's reserve, then this is acceptable.

The way around it however, is that the reserve is not established until the day of the auction, when there is a better sense of what the market is willing to pay. Over the course of the marketing campaign, the advertised price may change to reflect the level of interest.

I was power of attorney for some friends who were overseas and were selling one of their IP's over the weekend. The initial advertised price was $260-290k. The range placed on the agency agreement was $270-295k. As the campaign progressed the advertised price range was amended twice, with upward revisions of $5k, to be $270k-$300k in the last week. We agreed that the reserve should be $300k and sold for $305k on the day.

I think there is an absolute legitimate issue to take up with the authorities based on what you have said. Keep us updated with how you go.
 
You do here about under-quoting a fair bit in VIC, in NSW they tightened the law in 2002-2003 with the new ACT.

However you still see it happening - earlier this year Office of Fair Trading cracked down on the practice and it was reported that some of the leading Sydney agents were fined.

I was surfing re.com this morning and came across this property - I have looked at other similar properties and suggest that this is either the bargain of the century, a typo or a case of under-quoting?
 
I was surfing re.com this morning and came across this property - I have looked at other similar properties and suggest that this is either the bargain of the century, a typo or a case of under-quoting?
Collector that property will probably go for $100K give or take a bit. Similar properties in the area have sold from $95K > $110K. The only thing close to $50K was a burnt out shell for $45K. :eek:
 
Collector that property will probably go for $100K give or take a bit. Similar properties in the area have sold from $95K > $110K. The only thing close to $50K was a burnt out shell for $45K. :eek:

Ok.

Thats close to what I thought - 1970 units starting from 75k

so the agent is covered by saying $50,000 +, because any price of 50k is covered by the +.
 
Hi renomegahan,

Your searches and due dillegence on the property/area you are buying in should give you an indication to the price a house/unit should sell for.

The agents will not tell you the reserve...Many bidders tend to the drive the price up when people get carried away. The agent is working for the Vendor.

Sure there are times when the price is over-inflated, especially in a heated market. However, if this keeps happening to you it seems to me you are not doing your research properly.



Regards JO

Hi Jo,
I can totally see what your saying about doing my research and without writing an essay about the topic- i can assure you that my research was done. I sent the agent an email asking for the estimated sale price just out of curiosity. I thought the property was worth 520k-550. When i received the reply, i almost fell off my seat. I instantly thought that the figure was low but ended up second guesing myself because the property was right on the border of two suburbs which are very different in price. I have been to quite a few auctions lately where the price has gone way above have what i thought it would and there are many more that have gone under what i expected but in this case the property was actually passed in for around 100K over what the agent said was "THE ASKING PRICE"- I just think this is a really ordinary example of how an agent should act. Trust me, i am happy to play the game and hope that if i ever have to sell a house that my agent works really hard for me, but i dont ever want one to have to lie and make a fool out of themselves like this agent did to me and the other people who attended this auction on the weekend
 
Is this underquoting? For your consideration.

This property was purchased unrenovated back approximately 12 months ago for $671k. I am guessing they spent anywhere between ~$50k-$100k. (haven't seen the renovations in person). They are quoting $675,000 to $725,000.
 
Underquoting occurs when an agent misleads a prospective buyer about the likely selling price of a property for sale.


This situation is eminently avoidable by ;

1. Not asking the agent what the likely selling price is, and
2. As a Buyer, never allow the Seller's agent to "lead".

If you don't allow the agent to "lead you", they can never "mislead you".



Your searches and due dillegence on the property/area you are buying in should give you an indication to the price a house/unit should sell for.

Top stuff Josko, spot on.
 
Grrr... I'd be infuriated, too, renomegahn.

It sounds to me like a breach of the law, and I'd report it to Consumer Affairs Victoria.

They may not do anything, but if you don't report it, you're guaranteed that no action will be taken.

Yep. I would also pop down to the office and take a piccy of the listing if it's still in the front window (& it mentions the range). If enough complaints are received the chances of action being taken are greater.
I'm actually starting to see more and more agents not advertising prices at all which throws the DD back onto new & seasoned borrowers even more.
 
This situation is eminently avoidable by ;

1. Not asking the agent what the likely selling price is, and
2. As a Buyer, never allow the Seller's agent to "lead".

If you don't allow the agent to "lead you", they can never "mislead you".
Of course you need to ask the selling price! In the first place you need to look at property selling within a set budget range. Yes, you can research, but given a range factors such as motivated vendors and so forth, to suggest real estate could be advertised and auctioned without any prior discussion of asking price is simply ridiculous!!

Of course one also needs to have a balanced view of a REA's advice and appreciate who they work for, however given that their job is an AGENT - they are meant to be facilitating a transfer of real estate and thus need to provide as much accurate information as possible to aid that. The fact that it is against the law is a clear indication of the serious nature of the inconvenience caused by REA's underquoting.
 
This is common practice here in Sydney.

To give you an example, I saw one of the most rediculous things in my life for a pair of side to side terrace houses near Central station (Sydney). Trying to dig up the ad.

Basically these pair of houses were tenanted at the moment renting for around $450 pw. They are rundown, the kitchen and bathrooms need alot of work. 2 bedroom plus 1 spiral stairs to the attic. The agents bresic whitney were quoting between 600-650k. They had enough yard space to park 4 cars (2 in tandem side by side) with dual rear lane access.

Come auction day this is what I saw, I registered well I don't think he even took my license number down except give me a bidding sign. Anyway the auction starts off, a woman with a young child sits on the opposite side of the street on the kerb and sticks her hand up for 600k. A few more bidders behind finally coming back to her putting in a bid for 650k. Next I know it the auctioneer announces some bull**** about this is your chance, the second one may go for more then the first. Slience for a few minutes.

Next thing you know, well this auctioneer goes we will suspend bidding and auction off the second terrace house before coming back to this one. WTF so you can suspend an auction? Well heres the funny thing. Anyway we keep going this same woman with this child on sitting on the kerb starts bidding again up to 660k.

Then the woman announces to the agent, oh I only want to buy 1 house. I mean WTF??? then why do you bid on both? What if the vendor decides to sell you both, you are up for 10% on each one that you probably cant even afford in the first place. The bidding stops at 660k.

Both of them were passed in, the reserve was 685k. Seriously what a waste of time. The vendor clearly didn't want to give these houses away, they are on 1 title as the lands have been merged. They need to be sub-divided again. Now the funny thing is, one of my friends went in to negotiate as he wanted to buy them both or none. He offered 1.3 million for both houses this was rejected.

I believe the woman was staged there to dummy bid with no intention to buy. Might have been related to the vendor, judging by the way she sat on the kerb and what she was wearing. I mean if you were serious about buying wouldn't you stand up and do the bidding.

Come 3 weeks later, the agent announces both houses have been sold 675k and 685k. Well imo they won't sold at all, I go past there regularly and I see the same tenants in there. The signs were removed 1 week after the sale, Im sure you can have an instant settlement. I will be getting my friend to RPData the 2 houses in a few months time to see if it did really sell.

IMO this was all staged, I could have reported the whole thing to ACCC. But its not worth my effort.

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007848130

This is the house Im talking about and the one next to it. Anyone got RPData access? Can you see if this was sold at all =D.

Cheers,

Slam
 
It's listed down the bottom as sold but that data is taken directly from RE.com

It's not changed on the header yet. It takes time for that though. It wouldn't have even settled yet.
 
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