TWO MELBOURNE REAL ESTATE AGENCIES FACE LEGAL CHALLENGE OVER UNDERQUOTING ALLEGATIONS
Although we don’t normally comment much on interstate trends the article with this same heading above that appeared in the 5/1/17 issue of ABC News online was worth special attention because it affects real estate agents and vendors everywhere.
It said, “Consumer Affairs Victoria (CAV) has launched legal action in the Federal Court against two real estate agencies over allegations of underquoting in Melbourne.”
They were not minor charges nor were they just an odd one or two offenses. One agency was charged with offences relating to 25 properties it marketed in 2015, and another had 9 breaches involving nine properties in 2014 and 2015 which resulted in as much as $330,000 in fines and $80,000 legal costs for one of them.
The big issue is that agencies like these are marketing properties knowing the vendors would not sell within the listed price range, or that had no reasonable chance of selling for the price listed in the current market.
The article went on to say that complaints relating to underquoting to CAV have risen from 123 in 2013-14 to 339 in 2015-16, leading to the creation of the taskforce.
We haven’t had that sort of attention yet from Consumer and Business Services in South Australia but it’s always possible.
The issue at stake is that potential buyers are being drawn to properties advertised for a lot less than they are worth. This could mean not just that people may have wasted their time but they may have missed out on making offers on properties they otherwise had a lot better chance of buying.
To many buyers this may seem like an inconvenience at most but to us it also highlights something completely different. A very important principle is being completely overlooked in this article that is potentially of huge importance to vendors.
Most sales agents accept that to get the best sale price for a property they should advertise the lowest price possible. This will draw in the crowds. Sales is a numbers game; the more people that come through a property the more likely you will get a sale for the price you want. Although some people will waste their time by coming to see a property they later find was out of their price range a number of these people will instead stretch their budget and end up buying.
Bringing the biggest crowds to open inspections builds hype and expectation that can be the engine for driving the price up.
When vendors hear an agent talk of advertising the lowest possible price they start thinking they are going to give their home away for a song. There is method in what they do. This is not like Gumtree or like selling a car. It can be demonstrated with sales data that tracks advertised price drops and days on market that advertising low can result in higher prices in shorter times.
This same data will alternatively show that advertising higher prices can result in a sale taking much longer to happen with prices having to be discounted much more to rekindle interest from a market that may have got bored with seeing a property languish for so long on the sales listings.
There can be a fine line in getting the balance right between discounting to attract the numbers and loading the price out of greed. Sometimes discounting will get the highest price although the vendor will fear the agent just wants a quick sale.
Alternatively the vendor’s only goal will be to push up the asking price to unrealistic levels and this makes the agent fear it will become a marathon effort that will end up being a bargain basement discount sale.
It is critical that you consult a sales agent who can find the right balance for you because there can be too much at stake if you don’t get it right.
Ring Mark Nielsen on 8186 2777.