It has started creeping back into the Adelaide residential real estate market...
UNDERQUOTING.-
I will very brieftly explain the changes that were imposed by REISA on the South Australian real estate industry. The document is about 40 pages. This is a summary on pricing.
Revised regulations came into effect in July 2008. The addtional laws were designed to curb pricing irregularities. In the sales agency agreement the document must specify the agent's genuine estimate of the selling price of the property. The price can be expressed as a single figure (e.g. $400,000), or a price range. A price range must be specified by nominating upper and lower values. The upper value must not exceed the lower value by more than 10%. That is to say, if the lower value is $400,000 then the upper value can not be higher than $440,000. The lowest quoted amount in a price range,represents the lowest amount of money that the vendor (seller) stated that he/she would accept in payment for the property.
Potential home buyers and investors are lured into thinking they have a genuine opportunity of securing the property based on the agent's relatively understated price indication. The purchaser proceeds to expend time, money and emotion, including building & pest inspections, strata inspection reports, architects for renovations, solicitors & conveyancers, council searches and deposit money preparation to finally discover that they never had a chance of being successful & the seller wouldn’t have ever accepted the price that was originally quoted by the agent. The price was simply used to ‘bait’ their interest.
This method of underquoting attracts a lot of buyers to ‘sale by negotiation’ as well as auctions. Mislead purchasers create a sense of excitement in the early stages, while the more astute and well informed buyers attend with a plan, a budget and primary/seconday information required to accurately evaluate the offering.
The majority of agents originally took these regulations quite seriously.
The market has been bouyant in the lower - medium sector. Median home values in South Australia have risen during a very turbulant eighteen months. There has been a lot of confusion about global property values, particularly to those who have listened to the media without the consultation of primary or secondary research.
A real estate agent may make first contact with a vendor years before the property goes to market. The sales process involves the agent keeping in touch and giving updates as to market influences and pricing.- Some do this more effectively than others.
If an agent quotes a price to a vendor a year prior to listiing, then takes a month to start the sales campaign, and another month to sell, then after 14 months, the price will have adjusted, sometimes by 15%, taking into considerations that over 10 suburbs have risen over 38% in the last 2 years.
The vendor and agent may advertise the home a little over the original agreed value as of 14 months prior. The purchasers inevitably flock to an obvioulsy underpriced property and climb over each other to throw offers at the agent. When there are dozens of interested parties, then emotion dominates (even with entry level investors) and the price is driven up above genuine market value. This is known within the industry as "feeding the greed"
There are some agents who, for no reason other than to deceive, deliberately underquote or "lowball" the stated value - Especially in the case of auction.
Have you experienced blatant underquoting?
Have you been influenced to pay a considerable amount of money above the original stated asking price for a property?
We'd like to hear about it...
If you are looking for a well performing residential or commercial investment property, an addition to your existing property portfolio or a home to live in, We guarantee to save you money on your next real estate purchase. Go to http://www.directnegotiations.com.au/ or call the team on +61 (0)8 84631997
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