Where have all the price quotes gone?


3/03/2013

When did agent price quotes become a state secret?

By Catherine Cashmore

 

 

I must have missed when price quotes became a state secret because – barring a few exceptions – they used to be listed on just about every property advertisement for sale.

Anyone in Victoria who has searched though one of the online real estate websites recently will understand what I’m talking about –and judging from Australia’s real estate obsession with property and wealth building it would no doubt be a fair few million.

Putting a price on a real estate, particularly with homes offered as private treaty, is not difficult.

Ideally, an assessment of the property is undertaken by the sales agent – one familiar with market sales in the immediate locality – and in conjunction with the vendor, a price is set that produces a happy balance between both vendor expectation and local comparable sales.

If interest is lagging in the two weeks following, the agent can negotiate with the vendor to reduce the range.

If sales enquiry is healthy – or an offer in excess of the range is achieved and subsequently rejected – the agent has the ability and ethical responsibility (in conjunction with their vendor) to change the quoted range to reflect the heightened level of interest.

For a proportion of agents acting within their “reasonable” duty of service, this still is the norm.

However, now it seems – in Melbourne at least – every second advertisement you click upon, whether auction or private treaty, has “contact agent” in bold letters underneath the subheading “price”.

An enquiry then produces a roundabout of guessing games with somewhat wishy-washy lines totted out, such as “it’s too early to tell”.

In other words, the agent is indicating he has no idea where to place his price quote, because Joe Blogs hasn’t yet walked through and in some occurrence of pure fiction (which I have yet to see with my own eyes) stopped to tell the agent exactly what he’s prepared to offer.

While we all agree in part that a market can only be valued on what a buyer is prepared to pay, this is precisely why sales agents appraise property against recent comparable market sales in the first place.

When combined with good local knowledge, a market appraisal will give the agent a very good indication of buyer demand – at least to the degree of being able to publish a negotiable price range that falls in line with vendor expectation at the outset.

I should pre-empt before going further that a proportion of agents I speak to will give me a realistic idea of vendor expectation upon enquiry – however, after years of complaints within the industry regarding those who still choose to lowball their price ranges or quote using a ‘+’ price that can mean anything from 5-30% – it seems the practice has now moved into the verbal domain, allowing a number of agencies to continue their lines of deceit with no fear of reprimand.

It’s time we valued the ethical side of our sales industry with a little more seriousness than pricing an auction on e-bay. The continual problem with different methods of quoting – or lack thereof – runs to the very base of mistrust most buyers have against the real estate industry as a whole - and it’s a brush that tars us all.

Furthermore, considering the current atmosphere, in which Victoria has been through roughly two years of minimal movement in actual house prices with the market barely shifting week to week (that is, unless you’re following the “daily house price index”, which seems to bump along, offering its own short-term interpretation of price growth). No agent can use the excuse that he’s been caught out by any dramatic shift in market movements or buyer sentiment. Most homes are selling at their comparable appraised value, and they have been doing so for an extended period of time.

It seems silly to point out the obvious, but no buyer likes to play guessing games when it comes to putting a price on an advertised listing – and neither should they have to. Everyone understands real estate is a negotiated asset, however, the verbal game playing that now surrounds the sales industry in Victoria is often laughable – ranging from “we don’t know yet” to “properties in the area are selling in the $400,000 and $500,000 range” – an insulting response at best.

If we were operating in an ideal world, buyers would ignore price quotes altogether and do their own research to establish market value prior to spending hundreds on a pest and building inspections or solicitor fees chasing an unobtainable dream. However, closely comparable sales data is not readily available for buyers.

Computer-generated “estimates”, as Patrick Bright pointed out last week – are, more often than not, hopelessly inaccurate.

Suburb reports are equally unhelpful, and while median data will give an indication of the dollars the majority market is spending, it’s no help when evaluating individual property prices.

In Victoria auctions often result in “undeclared” results, and private sales are just that – private. The street name will be listed, but the other relevant and essential data is missing.

Using a buyer advocate who has access to such information combined with the market knowledge to offer an educated opinion is one option – however, unless we’re going to place a rule of law that every single buyer should pay a few thousand for such a service, it’s reasonable to suggest buyers deserve a “hint” of vendor expectation by way of an accurate price quote before wasting time and money chasing a dream.

A handful of agencies dealing with the more volatile luxury end of the market, in which interest is discretionary, understandably choose to sell via expressions of interest. However, the decision to drop the quoted range all together from a large percentage of real estate advertisements seems, in a good number of cases, to have been employed as “self-protection” from accusations of “underquoting” – a feature of which results in the price published bearing no relation whatsoever to the vendor’s reserve.

Vendor expectation can often be inflated.  It’s made worst by the commission based competition that rages between real estate agents and their respective agencies – it unfortunately promotes the need to buy a listing or risk missing out to a competitor who promises more. There then follows a process called vendor education – where high expectations are hopefully modified.

In Victoria, if the vendor does not disclose the reserve on the documentation, quoting below the written estimate of market value on the authority is officially “underquoting”. With no reserve written, the written estimate does not necessarily need to reflect vendor expectation.

It may not be admitted as such, but when agents list a property it is common practice to encourage the vendor to withhold their reserve price. This enables a conservative estimate of value – as either a verbal or published quote range – to glean as much buyer enquiry as possible.

The idea is sold to the vendor via explanation of the “buyer pyramid” – it works a little like step quoting – get the lower priced bidders to build momentum during the auction to fuel those bidding with healthier bank accounts to step in at the end.

Without the lower budget bidders, auctions can pull up short without the usual frenzy that has in our boom eras of growth significantly contributed in pushing prices to unsustainable levels.

Needless to say, by the time the auction occurs any gaping hole between the quote and reserve can be waved off with the excuse that the vendor changed his mind – or ‘upped’ expectation.  Hence why it is so easy to get away with purposefully placing the price range below the level at which you know the vendor will sell – when the price range is verbal, it’s even easier to manipulate the figures.

To suggest that a vendor’s expectations fluctuate to such an extent as to not be represented in the price quote is highly questionable. Having worked as a sales agent in previous years, I can categorically say there was never a time where I didn’t know my vendor’s approximate reserve well enough in advance of the auction to place a reasonable quoted range on a listing from day one.

Furthermore, vendors are not without blame. Assuming the price quote is a estimate based on “recent comparable sales” and the vendor isn’t in the dark when it comes to the price quoted on his or her vendor-paid advertising campaign, why would he or she agree to list the property and quote at a level he or she would not be willing to sell in the first place?

In such instances, I would suggest this is a pretty good example of a lowball quoting – conservative at best, deceitful at worst.

This weekend I’ll be bidding on a property quoted at $430,000-$470,000. I already know from my own research of comparable data it will sell closer to $550,000 – I also know from my conversations with the agent, that over 160 groups have inspected the home and he now has “the low $500,000s covered”. The price quote has not changed throughout the campaign.

It’s time vendors took responsibility for their own paid advertising campaigns and ensured their reserves – or ranges in which they’re prepared to negotiate – are published at the outset. If minds are changed, quotes should be changed, but leaving such a large question mark for buyers who are increasingly growing frustrated at having their time, money, and energy wasted is damaging for all concerned.

 

Previous Article Back Next Article

Our Services

Buyer Advocacy

Buyer Advocacy

Whether you want us to bid at auction, or provide a comprehensive buyer advocacy service to search, asses and negotiate your ideal investment property or home, we tailor a plan ideally suited to your individual needs.

Read More
Development

Development

We have the expertise to assist with any type of development you are considering - large, or small - from concept to completion.

Read More

What our Clients are Saying

Catherine worked tirelessly in finding me a great property at a good price. She did things that I wouldn't have done (hours and hours of legwork) and more importantly, couldn't have done (organising the purchase before anyone else had even put in an offer). When I was ready to give up, Catherine kept working. I'm certain that I never would have been able to buy the same property within 10k of what we eventually settled at.... David
The expertise you bring are excellent and helped us understand the process and what to do and what not to do. You discussed at the beginning that by using you it will save us money and in our instance and the current environment of Melbourne’s market I believe you saved us $100,000 or enabled us to get into a suburb which going to auction would have gone way over our limit. You worked tirelessly to help us purchase a home.... Karen
“You impressed us from the start, especially compared with the other buyers agencies we approached…” - Raj

More Testimonials

Why use Cashmore & Co?

Cashmore & Co are experts in market cycles and property investment 

Catherine Cashmore has accrued many years experience working in the Australian real estate market. She is President of Australia's oldest economics organisation (Prosper Australia) and has lectured widely on the real estate cycle and the economics of land.

it's this knowledge that sets Cashmore & Co apart from other real estate agencies. 

Cashmore & Co won't 'spruik' the market, or try and convince you that it's always a good time to buy.

Rather, Cashmore & Co use their expertise to assist investors, home buyers, and developers to make wise decisions based on their individual budgets and unique circumstances. 

They simplify the buying process saving buyers thousands in negotiation, as well as preventing costly mistakes.

Many of our clients benefit from insider secrets we have gleaned from years of experience that buyers, sellers, and developers, simply do not have access to. 

You can’t help but accrue this kind of on-the-ground knowledge when you’re involved with literally dozens of purchases and sales each year.(And also when you have a rare knowledge of the long-term property cycle as your framework.)

Whether it’s getting into a suburb you thought was out of reach, saving a hundred grand by avoiding a too-good-to-be-true apartment pitch, or getting a foot through the door in a hot market, Cashmore & Co has all the practical property ‘hacks’ to place you ahead of the competition.

Investors not only gain assistance with their property investments; with Cashmore & Co they have access to a treasure trove of advice and strategies that help extract the maximum amount of wealth creation from the 18-year cycle that you will not get anywhere else. 

Please click here to see the range of services we offer. 

Or contact us for more information. 

About Catherine

Catherine Cashmore

Owner & Director

Herald Sun Pic .jpg

Catherine Cashmore has been working in the Australian real estate market for over 14 years.

Originally from the UK, and having also lived in the US, Catherine has extensive experience across a range of international real estate markets.

As a buyer and seller advocate, Catherine has assisted hundreds of home buyers, investors, and developers, find, assess, and negotiate, quality real estate for great prices throughout Australia.

She is President of Australia's oldest economics organisation, Prosper Australia - an organisation that has conducted vast amounts of research into the economics of land, market cycles, and the intricacies of how tax and government policy affect the markets.

Catherine is a regular and highly respected media commentator. She has often been called upon to guest lecture at universities and educational institutions (including RMIT and Sydney University) on how tax policy affects the real estate market, the design of cities, and the economy.

She is the editor of Fat Tail Investment Research's Cycles, Trends, & Forecasts, Catherine Cashmore's Land Cycle Investor, and Catherine Cashmore's Real Estate Wealth Course – publications that teach real estate and stock market investors about the land cycle, its impact on the economy, and how to create wealth from property and stocks using this knowledge.

She is also one of the former editors of the extremely popular The Daily Reckoning Australia (or the ‘DR’ as it's affectionately known to its 60,000 subscribers).  The DR is an independent financial news broadcaster that has been in the business of reporting financial trends that shape the economy since 1999.

Previously authoring the annual ‘Speculative Vacancies’ report, the only study in the world that analyses long-term vacant housing based on water usage data (Australia-focused), Catherine has an in-depth knowledge of the Australian real estate market and economic environment few can rival.

You can contact Catherine directly on 0458 143 089 or at cc@cashmoreco.com.au 

Meet the Team

Please contact us for more information
or call us on +61 458 143 089

Contact us for More Information

Contact Us