Price Guide

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Unlawful and unethical marketing strategies, which are at the heart of a large percentage of auction campaigns, will be the demise for many vendors.
A failure for vendors and a bigger failure for the real estate industry. 
No price guide. Is it the new under-quoting?
Ignorance or blatant disregard?
To begin, when agents seemingly don't understand nor can confidently form an opinion about property prices, they should seriously get out of the industry and go back to selling cars.
Pushing vendors for an auction campaign and all because agents fail to understand the dynamics of real estate and appraising property is not the method to achieve the best outcomes. Confusion and misdirection does not lead to clarity.
In my many dealings with local agents, I have found that many agents not onl do not understand how to appraise property, they also don’t understand property marketing 101. Both are essential in the process to achieve the best result for vendors.
For many, the quickest and easiest method is to “take the property to auction.” Real estate agents see this as the fail-safe method. The good old, “I can’t be blamed for the low price – its market forces…” excuse.
In my opinion, achieving the best outcomes for the vendor is not about; speed of sale nor how easy it would be for the agent to manage the sale.
The above therefore translates to being a major issue for vendors. My reasoning will be summed up in this article, and under the following four points. 
Why so many agents push for auction campaigns
1)     When many agents push for “auction campaigns.” What do they really want to achieve?
a.     Tie-up the vendor and have them commit to accept a price on the day. All due to the vendor’s large expenditure in their auction marketing campaign.
b.     They don’t want to work for the vendor for long and rightfully earn the commission.
c.     There is a belief that when a property is auctioned off; the market dictates the best price on the day. This, in turn, forces the vendor to accept anything on the day. Even if it is below what buyers were willing to pay. See tweets by @REshortsell
2)     Agents have in the past, purposely and will continue to under-quote the property to draw a crowd. To the vendor this appears as;
a.     A good turnout. Therefore, whatever the final bid is, determines the so called value of the property on the day.
3)     Agents have purposely under-quoted to draw a crowd, and to the buyer this appears as;
a.     A need to bid and bid emotionally, due to an overwhelming fear of missing out on the property. Thus creating, the control needed for the agent to show the vendor the bidder’s participation; to give the illusion of success.
4)     Agents want a quick turnaround and a quick commission fix.
a. Auction campaigns run for four weeks and the agents are guaranteed a commission at the end with great certainty. This is all due to the pressure placed on the vendor, as noted above. Pressure also added by the large marketing fees paid to run the auction campaign.
Now to the nut-and-bolts: Why this article? Why today?
I attended an recent auction in Parramatta. This auction was one promoted by a local, prominent and brand-name agency. What I was witness to will make Fair Trading NSW take special notice.
I will detail the conversations and the agent’s arrogance below. One may also note, his ignorance or even deliberate arrogance in regards to the auction process.
Conversation with the listing agent: words to the effect;
Me: Do you mind telling me the price-guide?
Agent: I can’t disclose the price-guide because the vendor won’t allow me to.
Me: If you can’t disclose the guide, then what is your opinion of value of the property?
Agent: I can’t say as there are no comparable sales in the area. [Keep in mind; this is advertised as two bedroom penthouse unit in Parramatta with a large balcony]
Me: Really, no comparable sales?  Couldn’t you base it on square meters, location and perhaps aesthetic value?
Agent: No! There are no comparable sales and I don’t know what it would sell for. [I heard something similar with respect to well documented auctions at Millers Point…]
Me: In the agency agreement; you must have given the vendor a price-guide, right?
Agent: Yes, we have to [by law].
Me: So, you must, as an agent, be able to form an opinion of the value of the property; I’m not going to hold you to it.
Agent: I don’t have to disclose what I gave to the vendor to you. And besides, there are no comparable sales. If you wanted a price-guide, you should have called me before the auction.
Me: I did call you twice; you told me the new legislation doesn’t allow real estate agents to give price-guides. Why is that?
Agent: It’s against the law and Fair Trading NSW guide lines tells us not to give guides.
Me: Is that so… But you gave the vendor a guide right? Can you show me the agency agreement, or tell me what you wrote on it?
Agent: No, I don’t have to show it to you.
The agent turns away and focuses on other potential, interested and registered bidders.
Buyer: Will the building next to this one, block out the view, when it is completed?
Agent: No it is against the law to block out the views, that’s why they are building it in two sections.
I smiled and shook my head as I walked away in total disbelief of the conversation I just had and the one I overheard. A conversation not dissimilar to the one’s where agents “spruikers” tell investors that they have insurance cover for 7 years, in high-rise apartment blocks. And pigs fly…
The outcome:
There was a crowd of approximately 26 people. The opening bid was $850,000. Subsequently, the property was passed in at $860,000 with only one bidder; whom strangely bid against himself.  
Overhearing the agent’s discussions with both the vendor’s representative and bidder at the time; we found out:
1)     The reserve had been set at $950,000 by the vendor and on the day.
2)     The agent's sale expectations was closer to the $1,000,000 + due to other sales.
3)     The agent also miraculously, appeared to know (had a revelation one might say) what other similar units in the area were being sold for.
Surprise, surprise. It appears the agent did give the vendor an estimated value of the property. One that was a lot higher than what it was passed in at.
For now we are noticing more and more; agents like this one, hide behind their misinterpretation of the FT NSW guide lines and what the guide lines were purposed for.
Furthermore, when more and more buyers are educated to counter the foolish, unethical and illegal tactics used by agents in their auction campaigns; buyers gain the advantage. Agents in turn, place their vendors at a high risk of losing $10’s if not $100’s of thousands of dollars.
Foolishly, both the agent and auctioneer, further allowed the property to be passed in at a low price. A price lower than the reserve. No vendor-bid was given, to help in maintaining a better chance of achieving the desired result, when the sale reverts to a private-treaty sale.
Why did they get a low offer in the first instance? This was all because the agent wanted to draw a crowd. No price-guide is the new under-quoting.
Well, in this auction, the “dumb and dumber” tactics backfired and more will continue to fail like this auction campaign.  Perhaps it’s time vendors made agents more accountable, particularly when they are charged high marketing fees.
Nonetheless, the losers in all this and like many other auctions, are the vendors. The vendor placed his trust in a professional that would guide them on the best method of sale.
The agent failed to both: to provide the best service to the client and present an ethical marketing campaign to engage the consumers (the buyers). Buyers want transparency, not the smoke and mirrors approach adopted by foolish agents.
Not quoting a price guide and going to auction with so many other comparable properties on the market, was a recipe for failure.
The campaign failed: it did however, draw a very large crowd but a crowd that was not willing to play the agent’s game. They could see right through the unethical conduct of the agent.
In this case, I am familiar with the vendors. I know for a fact they would not be bullied by the agent into accepting a lower than anticipated [quoted] price.
Reasons for marketing property by an auction campaign
The main principles for taking property for auction resound so clearly, as I write this article and sip down to the end of my coffee.
1)     Uniqueness (truly no comparable sales).
2)     Motivation:
a.     Forced sale by court order.
b.     Quick and urgent sale for personal reasons.
c.     Time constraint.
3)     Development potential: building or land.
4)     An unfinished project even.
Now there are many more, however, the above is a good beginner’s guide. For the same reasons above, there are also alternate methods of sale and ones that can achieve a better outcome. This is a better outcome in relation to both the price and the way the sales process is handled.
George Rousos: Real estate trainer, course developer and compliance coach at Industry Training Consultants, shares an alternate approach to a public auctions. 
My tip for real estate agents
If in total doubt and a value can’t be determined to be within the guide lines set out by FT NSW; call a licensed valuer. A licensed valuer can assist agents that have issues with forming a realistic price-guide.
Transparency is what buyers are looking for. If some agents believe they can fool buyers; think again. Buyers more than ever, are equipped with tools to help determine price values. In some areas, buyers are also contracting the services of “buyers advocates” to assist them.
However, it must be said that some agents just don’t believe they need, nor want professional help. Some simply feel they are above the law and protected by their real estate office-brand. Some simply run on an overdose of “auction and how to crunch the vendor” seminars.
EDWIN ALMEIDA is licensee in charge of <a href="https://www.just-think.com.au/" target="_blank">Just Think Real Estate</a>.<a href="https://www.just-thin.com.au/"> </a>
He is also the creator of <a href="https://www.youtube.com/user/JustThinkProperty" target="_blank">Oz Real Estate.TV</a> and a presenter for <a href="https://propertyinvestingvault.com/" target="_blank">propertyinvestingvault.com</a>.
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ealmedia-arK4DBYLjS

No price guide is the new underquoting: Edwin Almeida

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Potential investors looking to spend $500,000 in West Australia have plenty of options in the town of Esperance, with the possibility buying two homes in the suburb of Sinclair with change.
<a href="https://www.urban.com.au/property-observer" target="_blank">Esperance</a>, located in the south east of Western Australia, is known for tourism, agriculture and fishing.
Castletown is another suburb with potential, according to the Herron Todd White July 2015 Month in Review, with a modern finished home available for under $500,000 returning $400 to $450 in rent per week.
The best return on investment for $500,000 may be found in Nulsen, with the possibility of netting three homes with a rental of $250 apiece per week on average.
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po-LsXgBTHBmX

Property investment options abound in Esperance: HTW

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<div>It would seem the auction price secrecy in Queensland extends beyond their auctions, not just in the lead up.</div>
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Last weekend was the first batch of auction campaigns when estate agents <a href="/news/qld/38440-price-guide-ban-now-in-place-for-queensland-auctions" target="_blank">could be </a><a href="/news/qld/38440-price-guide-ban-now-in-place-for-queensland-auctions" target="_blank">fined</a><a href="/news/qld/38440-price-guide-ban-now-in-place-for-queensland-auctions" target="_blank"> for giving out pre-auction price estimates</a>.
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<div>Not that many ever did so, other than the McGrath Estate Agents, who brought the tried and tested, price guidance transparency formula up from the south with them.</div>
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There were 140 auction offerings <a href="https://www.homepriceguide.com.au/saturday_auction_results/Brisbane.pdf" target="_blank" style="line-height: 1.3em;">last</a> weekend across Brisbane. 
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<div>Sadly, just the 35 results were reported to Australian Property Monitors, in the Domain Group.</div>
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<div>There were just six auction results with the price outcome given – all successful sales by successful estate agents.</div>
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<div>They ranged from <a href="https://www.domain.com.au/property/for-sale/house/qld/alexandra-hills/?adid=2011561976" target="_blank">$442,000 at Alexander Hills</a> to <a href="https://www.domain.com.au/property/for-sale/house/qld/brookfield/?adid=2011574384" target="_blank">$1,288,000 at Brookfield</a>.</div>
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<div>There were eight sales with prices not disclosed – hardly helpful to an informed market. But perhaps a tactic to get possible buyers onto their phones with pent-up curiosity.</div>
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<div>There were 19 pitiful passed in results with no top bid/vendor bid indications.</div>
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<div>There were two withdrawals, so we perhaps ought give them the benefit of the doubt, as they work out what the silly laws permit in such circumstance so soon after their December 1 introduction by the Queensland Newman Government.</div>
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<div><a href="/images/2014/12/12/Picture%2019.png" target="_blank"><img src="/images/2014/12/12/Picture%2019.png" alt=""></a></div>
<div><a href="/images/2014/12/12/Picture%2017.png" target="_blank"><img src="/images/2014/12/12/Picture%2017.png" alt=""></a></div>
<div>Source: APM. Click images to expand. </div>
But there's no excuse, if agents want an informed market, for failing to provide full disclosure for the auctions with an outcome – sale, passed in or vendor bid.
Wavell Heights and Ascot hosted the most auctions last weekend in Brisbane each with four listed. There were three auctions each at Indooroopilly, Sunnybank Hills, Parkinson, Nundah, Hamilton and The Gap.
Last weekend was the second busiest on record - just down on the previous weekend's record 162, according to Australian Property Monitors.
This weekend will see a new record number.
There are some 167 homes scheduled to go under the hammer December 13 and then next weekend nearly 90 auctions are scheduled just five days before Christmas.
The Domain Group's senior economist Dr Andrew Wilson noted recently Brisbane has experienced an unprecedented spring auction selling season with 2093 homes listed for auction. This was well ahead the previous highest 1729 recorded over spring 2010 and last year's spring result of 1722.
"November has smashed the record for the most number of auctions conducted with 916 well ahead of the next best result of 728 recorded over November last year," he said.
Most auction ads now carry the disclaimer: This property is being sold by auction or without a price and therefore a price guide can not be provided. The website may have filtered the property into a price bracket for website functionality purposes.
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jchancellor-FAypfDUnLy

Brisbane property price secrecy even after the auctions

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Underquoting is a hugely tricky topic for many in property, with the “quote [or price] it low, watch it go” mantra said to be the modus operandi of many in the real estate selling business, especially when it comes to auction sales.
Recently, <a href="/news/29454-online-petition-for-mandatory-reserve-price-publishing-launched" target="_blank">EPS Property Search’s Patrick Bright began a petition against underquoting</a>, and encouraging the consideration of early publishing of the reserve price for properties heading to auction. Property Observer covered this petition upon its launch, and <a href="/news/29129-should-reserve-prices-be-published-for-auctions" target="_blank">discussed it with him prior to its inception</a>.
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SQM Research’s Louis Christopher has also expressed his dislike of the practice of underquoting and is vocally backing Bright’s petition.
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Property Observer recently attended an auction in Sydney where <a href="finding/29729-agent-underquoting-will-not-always-help-buyers-get-the-price-they-want" target="_blank">there was around a $200,000 discrepancy between reserve price and the price guide</a> provided by the real estate agent. The property sold at auction just above the reserve, and we have clear reason to believe that the vendors would never have considered an offer around the price guide provided. Certainly, there may have been buyers that were unable to afford this price and that may have spent money on inspections and conveyancing to prepare for the auction, let alone time. As a buyer's agent, Bright says that this is all too common and that he sees underquoting at the majority of auctions he attends.
SQM Research’s Louis Christopher has also expressed his dislike of the practice of underquoting and is vocally backing Bright’s petition.
"I am personally sick to death of underquoting in real estate.  It wastes time, money and breaks people’s hearts once they know they have been deceived. Ultimately it is damaging to the property sector and all those who participate in it,” said Christopher in his recent newsletter.
"One thing Patrick and I share in common is that we have a very strong belief in property market transparency and ensuring people don’t get ripped off in property transactions. Recently, Patrick has gone so far as to get a petition going to make it compulsory to advertise auction reserve prices to stamp out underquoting and dummy bidding,” he said, noting he 100% agrees with the objective, urging others to <a href="https://www.change.org/petitions/the-honourable-stuart-ayres-mp-nsw-government-make-it-compulsory-to-advertise-auction-reserve-prices-to-stamp-out-underquoting-and-dummy-bidding%20%20" target="_blank">sign the petition</a>.
However, Christopher also expressed his dislike at media ignoring the petition.
"Sadly, I can tell you now there are some dark forces out there who don’t want to see this happen. Indeed, Patrick has recently told me of some media outlets who won’t give this petition coverage, even after promises they would! No doubt they are worried they may lose advertising dollars due to these dark forces,” he wrote.
He said he had a message for those outlets: "Please show a bit of spine on this issue and give it the coverage it deserves.”
He told Property Observer that despite the pain some interests may feel in the short term, price transparency will create overall benefits across the market, and it should be given a run and prominence.
Recently, mainstream media outlets went gangbusters writing about Queensland’s potential change to ban price guides from auctions – something<a href="/news/qld/29009-queensland-auction-price-guide-ban-defies-common-sense-john-mcgrath" target="_blank"> Property Observer also wrote about</a> – and he noted that it is startling to see the contrast between some experts’ exposure and others.
"[Underquoting] does come out in a rising market,” Christopher explained. “Markets can move quickly, but what Patrick has put forward is that the reserve price isn’t provided until a week out.”
Discussing the Queensland potential price guide ban, he noted that he sat on the fence, saying there were many pros and cons. However, he noted that no guide is better than a phoney guide.
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"They’re big businesses protecting their bottom line, and it’s completely their right to do that,” Bright said.
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While neither would disclose which media outlets said they would cover the petition and since changed their minds, Property Observer notes that online there have been stories from Australian Property Investor magazine. Patrick Bright confirmed that API had been in support of sharing news of the petition.
Bright said that he doesn’t want to criticise individuals as he is sure there are powers above them calling the shots.
"They’re big businesses protecting their bottom line, and it’s completely their right to do that,” he said.
He also said that he is getting a lot of support when he personally speaks to sales agents, but finds that many are concerned of ridicule from their peers if they support the petition.
Disclosure: Jennifer Duke has signed the petition for reserve prices to be published, as well as <a href="/news/qld/29277-queensland-auction-price-guides-the-more-info-the-better" target="_blank">a petition opposing the Queensland price guide ban</a>.
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