James Kirkland is Director of Sales at Upside and has had over 18 years’ experience in the real estate industry. Here, he discusses a problem that affects both buyers and sellers: inaccurate price guides.
Why do estate agents give inaccurate property value estimates?
Underquoting can be a huge setback for people looking to sell their home. The optimistic view is that an inaccurate quote is unintentional. Although your agent should be on top of any changes in the local market, property markets are known to be volatile, and there may be a genuine market fluctuation.
That said, Melbourne and Sydney aren’t exactly unpredictable. Any fluctuation that does happen is well publicised, and month to month the changes in these regions aren’t big enough to impact individual sales much.
There is another, more disappointing reason behind underquoting as well: agents intentionally underquote buyers to generate interest and pull a big crowd to the auction. This is not only unethical but also illegal, and thankfully for buyers, underquoting is something that is being heavily watched by the governing bodies.
Misleading, stating or publishing a price that isn’t a reasonably estimated value is breaching real estate price range law, which has seen full underquoting reforms in NSW (January 2017) and Victoria (May 2017). There are substantial fines that come along with an unrealistic price guide, ensuring that buyers aren’t wasting their time on unrealistic home prices, and sellers aren’t expecting more than they’ll get.
In the current turbulent market, sellers also need to be wary of agents overquoting. Overquoting is when the agent inflates the suggested selling price as a tactic to win the listing. The real estate sales game is extremely competitive, and sellers should be well advised to steer clear of selecting their agent based on the selling price alone.
The best way to protect yourself against such practice is to ask questions, and judge for yourself whether the quoted price is backed by logic and evidence. If the price can’t be justified to the seller, it won’t stand with a buyer in the heat of negotiations. Asking what the agent will do to achieve this price puts focus on their strategy and skill, and enables you to ask the tough questions before you sign, not when it’s too late.
When real estate agents don’t give any price guide
Real estate agents can sometimes be pretty vague about giving a property value estimate. . It can be frustrating, especially when you reflect on what an agent’s duty is: to give an accurate and honest indication to buyers and sellers. So why don’t they give a price guide? Here are a few reasons why this might happen:
- The property is genuinely a unique property, meaning there are no comparable sales in the last 6-18 months to compare against.
- There are a couple of comparable sales, but none are exactly the same. For example, perhaps there is a similar home in the neighbourhood, but one has undergone a renovation and the other hasn’t.
But really, this shouldn’t happen, and it’s very rare when it does. Reports have to be evidence-based, and when there’s a lack of evidence, it’s tough for the agent.
What should be included in a good price guide?
For a seller, look for evidence when looking at a price point. By law, agents must provide evidence of their market opinion of that property. That evidence is found in property sales history for comparable properties. It’s a good idea to check that the properties used for comparison have a similar location, age, size, and state of repair (i.e. renovations). Agents should be using a reputable database, like CoreLogic or PriceFinder.
Make sure you know your rights, look at consumer protection agencies that provide information in layman’s terms. These make it easy to know what you should be getting – there are hotlines you can call for these government bodies. You can contact Consumer Affairs Victoria on 1300 55 81 81 and NSW Fair Trading on 13 32 20.
How to check if a price guide is on the money
Whether you get a pricing guide or not, investigate the agent’s claims using public information. Buyers are more educated on prices and have more access to data than ever before. Use Domain or realestate.com.au to look at the area you’re considering.
This can give a quick indication of what that property should be worth, based on the same features that the property they’re looking at has. You can use filters from parking, bathrooms, number of bedrooms, and this can give you an accurate comparison for what the property is worth.
Both buyers and sellers can use individual property sales history reports purchased from CoreLogic to get any information that isn’t publicly available.
Upside’s approach to price guides
All of our agents undertake a rigorous two-week training program, with a focus on compliance – we deep dive on it because we’re selling people’s biggest assets. In our day-to-day operations, we focus on transparency.
The Upside platform enables our agents to work efficiently, ethically and transparently – they have access to heaps of data, which gives them the ability to give the most accurate market estimation. They can’t send a report without making sure there are at least three comparative sales, not just within the price range but also the date range mandated by state law. Upside real estate agents always share as much information as they can with their clients, and in Victoria, we supply potential home sellers with a statement of information that shows an estimate sales range or single price.
As part of that training, we also focus on responsibility to the buyer – no one wants to be led down the garden path to think they can buy a property they can’t afford.
One of our unique features is that all agents have a manager who oversees the adherence to compliance across the entire sales department.
The last thing is nimbleness. Remember that price guides can change, due to expectations or new properties. Our agents’ ability to be nimble and communicate quickly to prospective buyers is very strong. We use tech to help make sure that we continuously maintain our communication around price guides right up until the point of sale.
To find out how much your property is worth, get in touch today.