Underquoting has been an especially hot topic of late, giving voice to disgruntled consumers, and it’s no surprise why. Housing unaffordability is an emotive issue and when people see agents flaunting fast cars, resentment is the predictable response from buyers who feel duped.
And while underquoting is often misunderstood, as an industry we must acknowledge the bad taste it leaves in peoples’ mouths when they feel misled.
President of the Real Estate Institute of Australia, Leanne Pilkington, says the onus is on agents to make buyers feel confident, and education creates transparency.
According to the NSW Fair Trading website, “An agent is underquoting the selling price of a residential property if they make a statement or publish an advertisement about its price that is less than their reasonable estimate of the property’s likely selling price.”
That is, the reasonable estimate of the property’s likely selling price as set out in the agency agreement.
It may seem cut-and-dry but as we know, the real estate market is dynamic.
And predicting the price a property will sell for can be challenging.
Irrespective of the statutory definition, from a buyers’ perspective, underquoting can take various forms:
- When an agent quotes a price under the figure or range in the agency agreement
- When an agent quotes a price under the figure they know the vendor would willingly accept
- When an agent quotes a price less than what comparable properties have recently sold for
Some point to the auction process itself as proof that underquoting is not as widespread as media reports will have us believe.
That it’s more myth than reality.
After all, the purpose of an auction is to create competition. It’s true that if a hotly contested auction pushes the price beyond expectations, and above fair market value, that this is not underquoting.
There are many reasons this can happen, and many simply can’t be known to an agent.
It might be the consequence of a buyer’s emotional connection to a property, or their strong desire to be in a particular area because of a specific reason like the local school.
It might be because the buyer is sick of looking, especially in a market of limited supply, and decides to go over and above their initial budget.
While underquoting is not linked to any of these examples, the buyers who miss out may nonetheless feel aggrieved.
There are instances in which properties attract a premium because of an exceptional marketing campaign.
Again, this is not underquoting, and it’s something that agents should really be celebrating.
But in doing so, they need to be explaining this to buyers.
Why was the marketing campaign so successful? Why did the property lend itself to such a marketing approach?
The crux of the underquoting issue – whether real or perceived – is the feeling among buyers of a lack of transparency.
Therefore, the best counter is for agents to be more transparent, and this means educating buyers.
This can be done in a number of ways. The best agents are great communicators, and they need to bring these skills to the fore.
Consider the information that buyers will find valuable, and the ways in which they’ll want to receive it.
In executing an auction campaign, agents will usually have recent comparable sales on file.
Why not include them on your auction sales handouts? Table them in the online listing?
Not all areas will have comparable properties, or at least not comparable properties that have recently sold. If this is the case, why not explain this as well?
Removing barriers to pricing visibility helps buyers understand how that pricing occurs.
The more they understand the process, even when it comes to pricing properties with no direct comparisons, the more confidence they will have in the transparency of that process, including its challenges.
Then, if a property achieves a higher price than expected, they will at least know where you were coming from.
Clearance rates offer another education opportunity.
These are typically published on a city-wide basis weekly, and form part of monthly trends, but are seldom suburb-specific.
A 70% clearance rate for Greater Metropolitan Sydney might not mean much in the context of a local campaign in a certain suburban pocket.
But this is information good local agents know. Why not let your buyers see that information too?
Buyer education makes for greater transparency.
Transparency supports agent trust. It also helps agents navigate the buyer reaction to those sales which defy expectations.
When a buyer misses out on a property they were interested in, if you have their trust, the opportunity to work together remains intact.
You can give them hope that another property will become available and together, you can work towards securing it.
And you can then walk them through the process which determines how that next property will be priced.
Instead of accusations of underquoting, by being fully transparent, agents can create understanding.
