How to Avoid Being a Victim of Underquoting?
If it hasn’t happened to you, it’s probably happened to someone you know. You find a dream home that appears to be within your budget, you get your finance pre-approved, you get your hopes up, and you get blow out of the water come auction day because the agent underquoted the property.
What is Underquoting?
Underquoting is the misleading practice of advertising a property within a price guide that suggest to hopeful buyers that it could sell below market value or for less than what the agent knows the vendor will accept.
Accusations of underquoting have been rife in the recent times as national property prices soared 24% over the past year.
There is no doubt that some agents out there have been intentionally underquoting properties to drum up interest, but not always. On many occasions selling agents get blamed unfairly for their reluctance to predict a strong competitive result, and in many circumstances, vendors exercise their right to change their price expectations without prior consultation with their agent. As property prices peak, less underquoting should occur.
Why Do Agents Underquote a Property?
The main reason vendors and agencies underquote is based on the belief that an underquoted property will attract more prospective buyers. It is hoped that these buyers will fall in love with the property so much that they will find a way to compete against most cashed-up buyers, helping to push the property’s final price up in the process.
Unfortunately, the reality is that many buyers find themselves shortlisting properties that are beyond their financial constraints and this leads to disappointment, wasted expenditure for building reports and due diligence, and lost opportunity.
Isn’t Underquoting Illegal?
Whilst the price guide legislation varied between states and territories, the problem was relatively endemic in many cities across the nation. Underquoting is illegal, there are many legal loopholes that existed in current legislation, particularly in Victoria.
How Do You Avoid Becoming a Victim of Underquoting?
Rather than rely on the price guide the real estate agent gives you, do your own homework. You can do this by looking at comparable sales within the last month or two on websites such as Domain and compare like-for-like properties and locations.
Here are some top tips from Real Estate Buyers Agents Association to avoid becoming a victim of underquoting:
1. Compare comparable properties by location, land size and condition.
2. Spend the months leading up to active bidding time (while obtaining finance pre-approval) to inspect, inspect and inspect as many properties and neighbourhoods as you can.
3. Look at other similar properties in the area and see what the agents have initially published the estimate price range as, what the reserve price was and what it has sold for.
4. Consider consulting and engaging a buyer’s agent to take care of the process so you can “buy with confidence.”
Frequently Asked Questions
What is Underquoting?
Underquoting is the misleading practice of advertising a property within a price guide that suggests to hopeful buyers that it could sell below market value or for less than what the agent knows the vendor will accept.
Why do agents engage in underquoting?
Agents may underquote to attract more prospective buyers. The hope is that these buyers will fall in love with the property and compete against cashed-up buyers, thereby pushing the property’s final price up.
Is underquoting illegal?
Yes, underquoting is illegal, but there are many legal loopholes that exist in current legislation, particularly in Victoria.
How can I avoid being a victim of underquoting?
To avoid becoming a victim, you should do your own research on comparable sales and consider engaging a buyer’s agent. You can also get your finance pre-approved to know your budget constraints.
What are some tips to avoid underquoting?
Some tips include comparing comparable properties by location, land size, and condition; inspecting as many properties as you can; and looking at other similar properties in the area to see what they have sold for.
How can Zippy Financial assist me in avoiding underquoting?
Zippy Financial can help you get your finance pre-approved, allowing you to focus more on doing your homework to make sure the properties you are interested in have not been underquoted.
Finally, don’t forget to get in touch with us in advance to get your finance pre-approved. That way, when it comes to crunch time, you can spend less time on your finance application, and more time doing your homework to make sure the properties you have got your heart on have not been underquoted.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.