Six must know facts about underquoting

Underquoting has received a lot of air time on Property Observer recently, and it's starting to make its way through mainstream media as well.

With a recent petition from Patrick Bright, asking for reserve prices to be published to solve this problem, seeing an uptick in signatories it's clear that we're only going to hear more about the issue.

Here are six things you should know about this topic.

1. It's often referred to as 'bait pricing' 
   
   Underquoting is often referred to as 'bait pricing', in the sense that it baits buyers by suggesting they may be able to snap up a bargain.
   
   
2. It is unlawful, and is attracting official scrutiny 
   
   Underquoting is not a legal, or ethical, practice, and recently has had Consumer Affairs Victoria pledge to look more deeply into the issue. However, they are not the first official body to try looking into the practice. Previously, Fair Trading has also apparently conducted an investigation.
   
   
3. The frequency of underquoting is hotly debated 
   
   There have been no official estimates, and industry bodies, and members, argue that it's anywhere from infrequent to every agent but a few. It appears this cannot be agreed upon. Property Observer has regularly asked experts about this issue, with very little consensus.
   
   In our exclusive, we asked a number of experts 'Is underquoting an issue we should be focussing on? If yes, how should we go about addressing it?', you can see all their answers here.
   
   
4. Buyers lose out financially 
   
   While some will argue that a buyer will not bid beyond what they can afford, and one would hope this is true, buyers will lose out financially if they believe they have a chance of achieving the property at the lower price. Pest and building inspections, solicitors fees and the cost of their own time attending open homes and researching a property - these are all costs that a buyer will have to foot the bill for, without any chance of achieving the home.
   
   
5. Queensland is so concerned about underquoting that they're considering losing price guides completely 
   
   One of the most discussed stories in the industry over the past few months has been Queensland's potential removal of price guides, which the Real Estate Institute of Queensland's Anton Kardash has noted is to avoid 'such complaints' that are rife in 'other states'.
    “We all know that by advertising a price guide or giving an indication of the reserve price, an expectation may be set at a level that is too high or too low and this may impact on the outcome of the auction,” he said.
   
    “It is with great pride that Queensland can say that it has largely avoided claims of misleading and deceptive conduct in relation to property price guides. Unlike in some other states where such complaints are rife, Queensland has not been subject to constant complaints of such a nature and will continue to prevent any future issues with the passing of this legislation.”
   
   
6. Underquoting might not even get vendors the best price

While the phrase 'Quote it low, watch it go' and variations have regularly been used to explain why real estate agents use bait pricing, it's interesting to see this in practice. At a recent auction, where underquoting was suspected, the auction actually achieved less than an earlier private treaty offer through a different agency.

If the buyers that attend cannot afford the true price the vendors want, then it's not the right crowd at the auction. All that happens is that a lot of people show up, which makes the agent look like they're doing a great job, however they are people who may not necessarily have deep enough pockets.

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Mark Armstrong's Underquoting: The clear and transparent solution

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