WHY are there too many buyers for too few homes in Sydney and Melbourne?
WHERE have the buyers come from? Are they all Australian Property Investors? Wealthy Boomers?
How many Proxy Buyers and how many have just flown in?
WHY is the housing property market ‘Hot’? Is it because of ‘Hot Money’?
SHARE TO LET OTHERS KNOW!
WITH the Real Estate Gatekeepers EXEMPT from the second tranche of the Anti-Money Laundering Laws (October 2018: Morrison Government)
WHAT does that tell you about how the Morrison Government is working to ensure housing affordability for Australian First Home Buyers?
WHY not ask your local MP when the Morrison Government will implement and enforce this AML legislation?
ARE Real Estate Agents underquoting? It’s almost as if it’s too difficult to mention it …
Of course they are, we suspect most AUSTRALIAN buyers and sellers have encountered poor practices by real estate agents.
Could it be they represent themselves, not the buyer or the seller?
Could it be we have weak regulations in Australia covering the real estate industry?
And on and on…
Are real estate agents underquoting, or beating expectations in a rising property market?
By business reporter Nassim Khadem
30 DECEMBER 2019
It is a problem that’s long been a feature of a rising property market: too many buyers battling for too few homes in the inner suburbs of Sydney and Melbourne.
- State laws impose penalties for underquoting, but proving it happens can be tricky
- Real estate agents say the reason properties sell for $100,000 or more than advertised is due to market momentum
- But buyers fear they are being pushed into spending more than their initial budget to compete for homes
ABC News did a call-out on social media asking if people were being underquoted for properties in Sydney and Melbourne.
A number of Australians wrote in saying they thought properties had been underquoted because they sold $100,000 to $200,000 above the advertised price.
But the real estate agents who sold the properties said the price advertised was within the reserve price of the vendors.
The agents said the fact the property ended up going for well above what they expected at auction was not underquoting, but the consequence of a ‘hot property market’.
According to CoreLogic, Australian home prices rose an average of 1.7 per cent in November.
Sydney led the gains, lifting 2.7 per cent for the month.
Real Estate Institute of Australia president Adrian Kelly says the fact homes are selling for more than their advertised price is an issue of limited supply amid growing demand.
“The problem we’ve got is we’ve got rising markets, particularly in Melbourne and Sydney, specifically due to low volumes [of properties available],” Mr Kelly said.
“But I can certainly understand the frustration because you put time and money getting yourself ready for auctions, and because of low volumes the prices go above reserves.”
State laws against underquoting include hefty fines
In NSW, agents face fines of up to $22,000 for failing to comply with the law and may also lose their commission and fees earned from the sale of an underquoted property.
And under underquoting laws introduced in Victoria in May 2017, agents that provide unreasonable estimates risk penalties of more than $33,000 and the loss of their sale commissions.
In the year to September, NSW Fair Trading conducted 12 compliance operations of real estate agents and issued almost $400,000 in fines.
CAAN: 12 cases of non compliance from the thousands of house sales in NSW … that’s like three fifths of nothing!
And during the 2018-19 financial year, Consumer Affairs Victoria issued 39 infringements for underquoting, worth almost $200,000.
A NSW Fair Trading spokeswoman said underquoting occurred when a real estate agent either verbally advised or advertised a property for a price that is less than the estimated selling price in the agency agreement they had with the seller.
“It is not considered underquoting when a property sells for a price more than what an agent estimated in the selling agency agreement,” the NSW Fair Trading spokeswoman said.
A spokeswoman from the Victorian Department of Justice and Community Safety also told prospective buyers to be aware that comparing the initial advertised price with the sale price was not necessarily evidence of underquoting.
She said examples of underquoting included when a salesperson advertised or advised a property for sale at a price less than the seller’s asking price or auction reserve price, told a prospective buyer a price less than the agent’s estimate of the selling price, or gave a price less than the price the seller had already rejected.
Mr Kelly doesn’t think stronger penalties for underquoting will make a difference.
He says there are cases of individual agents getting record fines amounting to about $1 million for deliberate underquoting.
“Agents have well and truly been put on notice about underquoting,” Mr Kelly said.
Competing in Sydney’s rising property market
For Alexandra Alewood, 42, and her husband Jamie, 34, who have been looking to buy their first home in inner-west Sydney since July, the competition for Sydney properties has been overwhelming.
She said her budget was around the $800,000 mark, but the houses they searched for in that range constantly sold for well above that price.
She gave the example of a two-bedroom apartment at 7/12-14 Pembroke Street, Ashfield, that ended up selling at auction $252,000 above the initial price advertised.
“When the property was first listed on realestate.com and domain.com, the price guide was $680,000,” she said.
She said the first day she went to inspect the property there were many prospective buyers, and that day she was given a verbal price guide of $680,000 to $748,000.
She then went to her conveyancer to get the ball rolling.
A few days prior to auction in late November, she received an email from the agent Cobden & Hayson with a price guide of $720,000 to $750,000.
She said a similar property at the same block, that was not renovated, sold in 2016 for $810,000.
“We were using that as a guide rather than what the real estate agent had said,” she said.
Come auction day, Ms Alewood said her budget was, “a good amount over $750,000 and we didn’t even get a chance to bid”.
“It [the property] went over our bid in 15 seconds,” she said.
“It sold for $932,000. A lot of people were gobsmacked by what had happened.”
Ms Alewood said an ABC News film crew was there to film the auction.
Auction prices often based on pure emotions
Ms Alewood never made a complaint to NSW Fair Trading that this was underquoting.
“From the little I do understand about the real estate game, it is not technically ‘underquoting’ if they did not give a different price guide to the vendors,” Ms Alewood said.
“Their [the agents’] argument is that two people really loved it, and that’s what auctions are, they are purely emotions,” she said.
But she still believes, given the interest that there was in this property there was an opportunity for the agent to revise the price guide or be more forthcoming with information to the prospective buyers.
“The one thing that I’ve learnt from all of this is the agents are not on the side of the buyer, they are there to get as much they can for the vendor,” she said.
“It [buying a home] is already a scary thing for first home buyers and this makes it so much more intimidating.
“We already live in one of the most unaffordable cities in the world, and then this happens.”
Cobden & Hayson’s David Carrozza said this particular sale was an “anomaly”.
“When you look at comparable sales in Ashfield, most were in the $700,000 to $800,000 range,” he said.
Nevertheless, he said this was not an example of underquoting, but of the Sydney property market picking up.
He said the indications to would-be buyers’ pre-sale were in the $680,000 to $748,000 range, in sync with what the owner had been told.
He said underquoting was when you’ve told the owner one figure and the buyers another figure. In this case the owner and the buyers were given the same figure, he said.
“When it came to the reserve, the owner set the reserve at $750,000 and they were happy to take a bit less if it fell short of that amount,” he said.
“The day of the auction, there was a few interested parties and the auction dictated the value.”
“At the end of the day, my job is to get the most [money]. I’m not going to tell buyers you’ve gone above the reserve, stop bidding,” Mr Carrozza added.
Being at an agent’s ‘mercy’
Further afield in the Blue Mountains area, Jos Eldred, 28, and partner Danielle, 31, finally purchased their dream home after an agonising six-month search.
Ms Eldred said several agents gave lower prices than the couple expected the property to sell for, although she also could not prove it was underquoting.
She singled out one property in Blaxland that sold some months ago for more than $90,000 higher than the advertised price.
She said she could not prove it was underquoting, but was disappointed with the way the agent handled the sale.
“To come back and ask us, ‘Would you be willing to spend $90,000 extra on top of what we asked for’ is really inappropriate and unprofessional,” Ms Eldred said.
“They [agents] are definitely all doing it to an extent — really trying to push you up from your maximum limit and try to squeeze as much out of you as possible.
“As a fairly young couple with not a huge amount of money to spend, it feels like you’re at their [the agent’s] mercy.”
She hopes governments can offer more education to would-be buyers.
“It would be really helpful to have an advisory service available,” she said.
“Coming into this fresh-faced and not really understanding much about the market, we were naive about what to expect and how to deal with agents.
“It was only after mistakes and crappy experiences that we got a handle on it.”
A spokesman from Chapman Real Estate told ABC News they rejected and disputed any allegations of underquoting.
The agent put down the $90,000 price difference to, “a sudden surge in the bottom end of the market”.
“Previous to the property in question being placed on the market there were very minimal comparable house sales at the lower end,” the agent said.
“The listing agent and home seller were fully prepared to sell the home in the advertised price range.”
Melbourne property prices also on the rise
The case of properties selling well above their reserve is also becoming more common in Melbourne where property prices have also picked up in recent months.
According to CoreLogic, Melbourne property prices lifted 2.2 per cent in November.
Elena Savva, 27, and partner Nathan have also been looking for a property for more than six months.
Ms Savva also believes most agents are underquoting but can defend it by saying it is just a function of Melbourne’s market picking up again.
She gave the example of a three-bedroom house at 25 Rhonda Street Avondale Heights.
She said the property was advertised at $600,000 to $660,000 but sold for above $780,000.
Bill Karp from Barry Plant Moonee Valley who sold that property said the market had rapidly picked up since the federal election.
“It [the property] wasn’t underquoted at all, it’s just where the market took it,” Mr Karp said.
He said the reserve price on auction day was $660,000.
“It went well above where the market expected it to go,” he said.
“That’s the free forces of an auction. It’s happening everywhere at the moment.”
He said a three-bedroom home at 13 Arbor Terrace, Avondale Heights was advertised around the $860,000 mark but ended up selling at auction on December 21 at $1.04 million.
“You can’t control these things,” Mr Karp said.
“I’ve done this [sell homes] for 36 years and there will never be a science as to what people pay.”
But Ms Savva thinks all agents quote lower than what they think a property will sell for in order to, “build a crowd on the day and in the moment get people who bid higher”.
“You spend all this time looking, you get lawyers to review contracts, you leave work early to get to auctions only to find people a lot older than you are buying for their kids,” she said.
Tips for buyers: Look at sales results, not agent estimates
Amanda Hann, 33, and partner Alistair, 34, have also been in the market looking to buy a house for the past six months.
Ms Hann says she is extremely frustrated at what she believes is real estate agents underquoting but that she has not been able to prove it.
She gives one example of 2/47 Smith Street, Thornbury which was advertised for $550,000 to $600,000, but sold at auction in October for $755,000.
But she said it was not just one agent that advertised at prices far lower than it eventually sold for.
“We have been to multiple auctions and house viewings and have missed out on a number of houses due to underquoting,” she said.
Melissa Morgan says she and her husband have been looking to purchase a unit in the eastern suburbs of Melbourne for the past four months.
“We quickly learned that properties listed in our budget, usually went well over,” she said.
“Our first auction had a price guide of $550,000 to $600,000. Our budget was $620,000, but the property went for $723,000. We were absolutely gutted.”
Ms Morgan says it is frustrating to be constantly misled about the true value of a property, and a requirement for real estate agents to list similar properties, “doesn’t seem very effective”.
“After a few experiences like that, we learnt to look for properties that were listed well below our budget,” she said.
“Agents cherry-pick results to make the house seem like it could honestly go for less,” Ms Morgan added.
Her advice is to do your own research based on sale prices, rather than rely on “meaningless” agent guides.
“My biggest tip to would-be buyers is to ignore the ‘for sale’ price and look at the ‘sold’ results over the past three months — it’s a far better indicator,” Ms Morgan said.