The Melbourne property market is red hot at the moment. There’s a shortage of stock (this means not enough houses to meet demand) and buyers are facing very competitive conditions right now, auctions are far exceeding asking prices and offer before auction are resulting in some very high sales prices.
Just what is underquoting?
Underquoting occurs when a real estate agent advertises a property for less than the estimated selling price or advertises it below the sellers asking price.
But I thought underquoting had been stamped out?
Consumer Affairs bought in legislation requiring agents to provide what’s known as a Statement of Information. The Statement of Information gives a range of 10% and must not be any lower than the sellers asking price and must include three comparable properties or provide a statement outlining why the property is unlike anything that has sold recently nearby.
If a buyer makes an offer higher than the range provided, then the real estate agent is required to change the asking price range accordingly (if the vendor has rejected the offer).
Is underquoting happening again in 2021?
Throughout late 2020, the real estate market dwindled, there just wasn’t very much happening in terms of sales. This makes it hard for agents to provide accurate price guides on their Statement of Information as there really weren’t any comparable sales to use as a reference. Additionally, buyers have had extra time to save during the pandemic year and are coming to the market in stronger financial positions than before. Coupled with low stock, there’s a bit of a frenzy building in the Melbourne property market right now.
33 Gillman Street in Cheltenham. This property was listed for $800,000-$880,000 and there was a lot of initial interest. An offer was made before the auction and rejected by the vendor – the quoted range was increased to $840,000-$890,000. The auction was held on Saturday 30th January and there were seven bidders on the day. As you can see on the listing, this house sold at auction for $1,122,000 more than 40% above the base asking price.
We saw a similar situation at 4 Geoffrey Street in Frankston the property was listed for $840,000 – $920,000 and was meant to go to auction. Days before the auction was due to take place an offer was made and the property sold for $1,030,000 – selling for 22% more than the base asking price.
Our final example is 2 Stuart Street in Armadale which is still on the market – we have a couple of clients looking at this one currently. The asking price is $960,000 – $1,050,000 and over the weekend the agent reported over 100 prospective buyers inspected the home which sits in a suburb where the median sale price is $1,800,000. If the previous two examples above are anything to go by, the final selling price on this property will be closer to the $1,200,000 mark (maybe even higher – we watch with anticipation!). EDIT: this property sold at auction on the 20 February 2021 for $1,720,000.
What can you do about it?
The property market is growing at an insatiable rate right now, across the country median house prices are at record highs. Depending on the method of sale (private negotiation or auction) there are different strategies you can employ when making an offer. In situations like this when buying is so competitive, having a buyer’s agent on hand to guide you through the process and play hardball when it matters is what is going to put you ahead of the pack.
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