{"id":1702,"date":"2022-02-03T04:24:42","date_gmt":"2022-02-03T04:24:42","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/why-agents-underquote-real-estate-prices-and-how-to-protect-yourself\/"},"modified":"2022-02-03T04:24:42","modified_gmt":"2022-02-03T04:24:42","slug":"why-agents-underquote-real-estate-prices-and-how-to-protect-yourself","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/why-agents-underquote-real-estate-prices-and-how-to-protect-yourself\/","title":{"rendered":"Why Agents Underquote Real Estate Prices and How to Protect Yourself"},"content":{"rendered":"

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Ever been to an auction where the property sold for hundreds of thousands of dollars above what the agent had quoted?<\/b><\/p>\n

I certainly have and I know many disappointed prospective buyers who have missed out at auction<\/a> by being misled by agents\u2019 quoted price ranges.<\/p>\n

Just to make things clear\u2026the practice of underquoting is where agents lure potential purchasers to look at a property (usually for sale by auction) with the suggestion that the property will sell for much less than they believe it will.\"Why<\/p>\n

By law, property advertising must not be misleading or deceptive.<\/p>\n

It is illegal for a seller or agent to misrepresent a property in any way when advertising or marketing that property, whether verbally or in writing and photographs.<\/p>\n

However, it\u2019s important to draw a distinction between underquoting (where the quoted price is far below the expected sale price and or auction reserve price) and a situation where competitive bidding results in a sales price way above the vendor\u2019s reserve.<\/p>\n

An auction is designed to extract the maximum price for a property by bringing a group of potential purchasers together in a competitive environment.<\/p>\n

I\u2019m often surprised how high an emotional buyer pushes up the price of a home in their eagerness to it.<\/p>\n

So it\u2019s not unreasonable to expect that agents occasionally get it wrong.<\/p>\n

Why do agents underquote?<\/h2>\n

Years ago a favorite saying of many agents was: \u201cquote it low, watch it go, quote it high, watch it die.\u201d<\/i><\/p>\n

While this may sum up why real estate agents used to underquote, over the last few years I\u2019ve found more and more agents reluctant to underquote, in part not to fall foul of the tougher legislation that\u2019s been introduced.<\/p>\n

But this is what happens when agents meet prospective sellers\u2026<\/strong><\/p>\n

An owner is thinking of selling so ask a number of agents to tell them what they think their property is worth.<\/p>\n

And of course, vendors are inclined to go with the agent that \u201cquotes\u201d<\/em> them the highest price.<\/p>\n

If the agent has been a bit generous in their appraisal, they quote less during their marketing campaign in an effort to generate enough interest in the property to get close to the p\"Whenrice the vendor hopes for.<\/p>\n

All the while, they also manage the vendor\u2019s price expectation down to an achievable level, quoting market feedback during the selling campaign.<\/p>\n

It\u2019s the real estate agent\u2019s role to broker a deal between a vendor who naturally wants top dollar for their property and a buyer who doesn\u2019t want to pay too much.<\/p>\n

So during an auction campaign, the agent walks a tightrope not being able to disclose the vendor\u2019s \u201creal\u201d reserve price while buyers, understandably, keep their cards close to their chest and do not honestly tell the agent how much they are prepared to pay for the property.<\/p>\n

What are Auction Price Guides?<\/h2>\n

Real estate transactions are a state-based law, but in general selling, agents are prohibited from quoting below the vendor\u2019s reserve price and the agent\u2019s estimated selling range of the property.<\/p>\n

Rather than disclosing a price, in some States the selling agent advertise a price guide or range and sometimes amends this (usually up) during the auction marketing campaign.<\/p>\n

How should buyers handle price guides?<\/h2>\n

1. As a buyer it\u2019s important to\u00a0be aware<\/b>\u00a0that underquoting takes place.<\/p>\n

I\u2019m not justifying underquoting, but since it occurs, it makes sense to have a pragmatic approach to it.<\/p>\n

2. Do your own\u00a0due diligence<\/b> regarding the property\u2019s value and the maximum you are prepared to pay.<\/p>\n

Search the Internet, attend auctions, speak with a variety of estate agents, and monitor auction results.\"<\/p>\n

See what the final selling price is and how it compared to the quoted price range before the auction.<\/p>\n

3.\u00a0Be realistic<\/b> \u2013 use the agent\u2019s estimated selling price as a guide only, and realize the seller is unlikely to set their auction reserve price (which might be above the advertised price) until the day of the auction.<\/p>\n

4. If the agent is quoting significantly less than what you believe the property is worth, ask the agent to justify their advertised price.<\/p>\n

Maybe this is a good property to make a strong pre-auction offer on.<\/p>\n

5.\u00a0Level the playing field<\/b>\u00a0\u2013 consider engaging the services of an independent buyer\u2019s agent.<\/a>
These professionals have access to sales data and are able to analyze and interpret the information correctly.<\/p>\n

A good buyer\u2019s agent can also assist in the negotiation process<\/a> or bid at the auction for you.<\/p>\n

They may also be able to use their professional relationship with the selling agent to peek behind the curtain and find out what price the vendor really wants and what other potential purchasers may be prepared to offer.<\/p>\n

Buying a property at auction brings out the best and worst of our emotions.<\/p>\n

Be prepared and understand what\u2019s going on in order to take part without getting hurt.<\/p>\n

ALSO READ: <\/strong><\/span>The 5 things buyers do that drive real estate agents crazy<\/a><\/p>\n