Under quoting
Talking under quoting with Kevin Turner
Miriam Sandkuhler
Kevin Turner: In recent weeks there has been a lot of talk, both in the real estate industry and from buyers and sellers, about price ranging, about prices at auction. There’s a new petition that’s just been raised, which is lobbying the Victorian government to do something quite positive about this. With the message, Miriam Sandkuhler from Property Mavens joins me. Miriam, I know you’re driving this but can you give me the background and why you’ve raised a petition, and what you hope to achieve by it?
Miriam: Sure, Kevin. What we’re finding in the marketplace, under-quoting is quite rough down here. Under-quoting is when prices advertised are substantially below what the agent knows the property to be worth based on recent sales evidence and what they know the vendor will except. It’s quite common practice in the beginning of a campaign to quote very low to give buyers an indication as to what they think it will go for. That gives the buyer a confidence to proceed with getting building and pest inspections done and paying for contracts to be reviewed, only to find out that the reserve price at auction is substantially above the quote range, and then the property consequently sells for a lot more.
Kevin Turner: I know the practice is quite widespread, not only in Victoria but right throughout Australia – I think all wherever auctions are conducted. Two purposes in that. One is to, what’s called in the industry, lowball or to feed the greed to get the buyers involved and then work them up. Also, as an exercise to get the sellers down. It is quite an uncultured type of practice, I think, and understanding why you’d want to rule that practice out. Do you think publishing the reserve is actually going to achieve that?
Miriam: The practice you’ve described is very old school and I think the general public are tired of it. By amending current legislation to force vendors to declare the reserve price, and also estate agents to publish their vendors reserved price, will actually result in drawing buyers to the property who are actually within that price point. Straight away you’re eliminating people that are never in a position to be able to afford it. You’re being transparent to the marketplace. You’re drawing those people that can afford it. And you still have the capacity to run an auction and allow for competition at auction on the day. By declaring the absolute minimum a vendor will accept, it doesn’t mean that they can’t get a heck of a lot more with competition. It just means you’re getting the right people to that property to allow for that.
Kevin Turner: One of the things that sellers want to do when they go to auction is to achieve that premium price, which is what agents tell them auction is all about. Whether that’s right or not, that’s another debate, I guess. Doesn’t publishing the reserve take away that opportunity for them to do just that?
Miriam: You could see it that way but it’s not a cap on what they’ll pay for it. It’s just the absolute minimum they’ll take. In reality, at an auction, when you reach the reserve people don’t suddenly just stop and not keep going. If there’s competition they keep going. If a property falls or passes in at auction it means that reserve has never been met and people aren’t prepared to go up to that in the first place, so the whole process is failed.
The auction system isn’t perfect; it doesn’t work perfectly now as it is. I think agents tend to use it because it’s an easy method of selling to try and get an unconditional result within a certain period of time, and they get vendor marketing to do that. It’s a practice that’s basically despised by so many buyers, and on the petition that we’ve got going on change.org, within 24 hours I’ve had 20% of the signatures that we need, so I’ve had over 208 supporters. The comments there are amazing in terms of what people are saying their experience is.
Kevin Turner: What are they saying?
Miriam: One lady: “We lost six properties due to under-quoting. We ended up negotiating and buying privately. Underquoting is clearly misleading and deceptive conduct. I understand that it’s an offence for an agent to falsely understate the estimated selling price in New South Wales and South Australia. Why not here?” What about vendor bids? It isn’t legal to do it here either; it’s just easier for agents to get away with it here because they’ve found the loopholes in the system that perpetuate it.
Kevin Turner: I wonder how a seller would feel if, let’s say hypothetically say, a property is listed, the auction reserve is published at 500,000 dollars. They turn up at the auction and in fact the bidding gets up to say 600,000 because there’s fierce competition. How would the success bidder feel knowing they’d over 100,000 more than the reserve or the price which the seller would have taken?
Miriam: They’re going to understand that under competitive conditions that’s what can happen. The main thing is they’ve arrived at the auction knowing what the absolute minimum is and under auction conditions with other people there interested in the property, if that’s what they’ve had to spend to compete to secure the outcome, well then that’s a totally transparent and appropriate process.
Kevin Turner: One of the other questions I’d like to ask you too Miriam is what you’re suggesting here is almost akin to putting a property on the market with a listed price. You are publishing what the seller will take, which is what is done in private treaty. Just from your experience, how many people would pay over the asking price for a property that’s listed at a price?
Miriam: Again, it comes down to competition. I’ve been in situations where there’s been a price range on a property.
Kevin Turner: That’s a different thing though isn’t it? We’re not taking about price range here, we’re talking about a price.
Miriam: Okay, well price on a property, it’s basically a similar situation where if you pay that price on that day, the vendor can dupe the seller just like at an auction a vendor can choose to sell prior to auction. In this instance, if they put down a minimum price they’ll accept, it doesn’t stop offers being presented before auction, which currently happens anyway. It doesn’t stop them from selling before auction which currently happens anyway, but with sufficient interest and communication from their agent the advice might be look, there’s plenty of interest. Let’s take it to auction and let it run on the day, and that’s appropriate advice.
Kevin Turner: Miriam, I know what you’re trying to do is clean up the industry and I endorse that 110%. I think anything we can do to clarify the situation for buyers and sellers and make the whole thing a lot more transparent is certainly to the good of the industry. Anyone who wants to support you in that petition, how can they get to it and how can they sign on?
Miriam: It’s change.org. All they need to do is search and just search “vic government under-quoting” or vic, v-i-c, under-quoting. The petition will pop up and they just need to sign on with that to support it and ideally share it on Facebook and via email and to as many people as possible. That’d be great.
Kevin Turner: All the best with that Miriam and thank you very much for joining us today. Miriam Sandkuhler from Property Mavens. Thanks for your time, Miriam.
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