In the past couple of months, we have noticed a disturbing re-emerging trend of several agents in the North Shore under-quoting significantly as a strategy to attract buyers.
Aside from this being an unethical and illegal practice, we actually feel that this is not necessarily a good strategy for the seller or their agent in the long run either because:
- many buyers rely on the agent’s quoted price. If the agent under-quotes too much, come Auction time, many buyers will be financially unprepared to pay the price that the seller actually really wants to achieve.
- by under-quoting early on, the selling agent is actually setting the price ceiling lower than what might have been possible.
- by misleading buyers into thinking that they can afford to buy a property that is probably not in their budget, agents are doing damage to their own reputation. This is especially the case when many potential buyers invest time and money to conduct pest and building inspections for properties that have been seriously under-quoted.
- once an agent develops a reputation for under-quoting, potential buyers may not want to work with this agent in the future or will do so grudgingly and without trust or goodwill.
While most real estate agents who we come across act in a fair and ethical manner, unfortunately there are some agents out there who are not.
One way to resolve this under-quoting practice is for the Office of Fair Trading to enforce a disclosure regulation, whereby the selling agent has to quote the figure which was written into their contract with the seller. As it currently stands, the selling agent can have one figure in the contract but cite a different figure during the marketing campaign.
As Buyers’ Agents, we can help to deal with situations of under-quoting in the following ways:
- by identifying properties which are not realistically priced and likely to be above our client’s budget. In this way, our clients do not have to waste time/money on a property they are not likely to get.
- by knowing which agents usually under-quote and by how much. With this information and trend, we can then advice our clients on how much ‘buffer’ they need to prepare for in their budget should they like the property and wish to proceed to an offer or Auction.
- by understanding the market so intimately, we would be able to quickly sift through the under-quoted properties and find the rare ones which are perhaps a genuine bargain for whatever reasons and to strike quickly on these.
- by having a good relationship with the selling agents that they usually bypass the under-quoting business and tell us what the seller really wants. We find that very few selling agents under-quote to us – even though they under-quote to members of the public.
About Oliver Stier
Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation.