Estate agents have been accused of underquoting on property prices

Herald Sun - Craig Binnie
July 18, 2009

FRUSTRATED home hunters have wasted countless weekends visiting properties that were out of their price range.

Estate agent Century 21 Wilson Pride was the worst price predictor of the big agencies according to a Herald Sun study of 74 auctions from last weekend.

The agency missed the actual selling price by an average of 19 per cent.

In one case the firm said the expected selling price of an Elwood flat was $325,000. It sold for $412,500.

Buyers advocate David Morrell said agents were messing with people's lives by giving extremely low price estimates.

"If someone is looking in the $300,000 price range they probably don't have a $400,000 budget," he said.

"So all that happens is they waste their time and the agent gets a bigger crowd to make themselves look good at the auction.

"This has got to stop."

Collins Simms was the second worst agent in the study. The agency erred by 17 per cent. Jellis Craig was third on 15 per cent.

Hocking Stuart was off by 11 per cent and Biggin and Scott was off by 14 per cent.

Prospective buyers are particularly angry when properties pass in after bids that are above the advertised price.

Last weekend, Hocking Stuart advertised a Prahran house at $1 million plus and passed it in at $1,020,000 on a reserve of $1,120,000.

Nelson Alexander advertised a house at Gowanbrae at $670,000-$730,000. It was passed in at $700,000 with a reserve of $750,000.

Bennison Mackinnon advertised a Port Melbourne house at $700,000 plus. It was passed in at $760,000, the vendors refused a later offer of $770,000 - $70,000 above the advertised price - and did not disclose the reserve.

Estate agents stress that predicting prices at auction is nearly impossible. But it is deliberate underquoting that angers buyers. Prospective buyers regularly offer the advertised price only to be told the owner will not sell unless it's well above that price.

But the agents continue to advertise the property at the lower price.

The Real Estate Institute of Victoria's chief executive Enzo Raimondo said Consumer Affairs Victoria needed to take action against agents who were breaking the law.

"They are the regulator," Mr Raimondo said. "They really need to do something, enforce them, get rid of some of the practices that aren't helpful."

Mr Raimondo said quoting a price range with an upper and lower price that accurately reflected the market price was a fairer way to quote.

Mr Raimondo said buyers, and agents who did the right thing, should complain to CAV when they saw cases of underquoting.

"Don't tolerate this sort of substandard behaviour," Mr Raimondo said.

CAV said yesterday it was on the lookout for underquoting, but Mr Raimondo mocked a claim by CAV that it had 80 investigators monitoring agents for underquoting and other offences.

"The last person they pinged for underquoting was someone we reported," he said.

CAV spokeswoman Heather Abbott said price-plus advertising was discouraged but was not illegal unless the price was below the price at which the agent knew the vendor was willing to sell.

She said it was up to buyers to research the market.

"CAV views this type of advertising as potentially misleading and complaints received in this regard are assessed and investigated in accordance with CAV policies," she said.

"Agents have been informed they must use their knowledge and skills when appraising property and ensure their advertising reflects a price, which they believe is the likely or estimated selling price.

"CAV will continue to take enforcement action against real estate agents where regulations have been breached.

"Prosecution is reserved for the most serious of cases.

"While agents have a responsibility to advertise a property at the vendor's asking or, in the absence of this price, the likely selling price, consumers have a responsibility to ensure they are informed."


Comment

I recently sold in Melbourne discussed selling price with agent. Price discussed was to be high 700 k low 800 K. First adv by the agent went in at 650 k plus. Rang agent and asked why? Reply was "you have to get people in" I complained. Next adv was 700k plus. Sold at 840K. I can see why people get frustrated, time wasted, inspection reports etc. Consumer Affairs Victoria needed to take action against agents who were breaking the law.

Posted by: Alan of Merimbula ex Melbourne 9:31am July 18, 2009