Underpriced to attract buyers
Ian (not his real name) from Melbourne received the following estimated selling prices from three different agents:
- High $300s, low $400s
- $410,000 to $450,000
- $430,000 to $460,000
His apartment was put on the market for ‘$390,000+’, eventually selling for $50,000 (12.8%) more.
“I had a minimum of $430,000 to $440,000 in mind, but the agent felt that the $390,000 listing would attract buyers,” Ian says. “But I never would have sold for $390,000.”
Ian says the agent later contacted him to say the ad had to be altered to give a range instead, so it was changed to ‘$390,000 to $440,000’. Around the same time, stories were in the media about the widespread underquoting of prices in Melbourne, and the Real Estate Institute of Victoria issued guidelines to members about advertising.
Ian's advertising was changed again and the property sold two weeks before the auction for $440,000.
The Real Estate Institute of Australia (REIA) advises that sellers should instruct agents about the price that a property should be advertised at, and should give clear instructions on the minimum they’ll accept. Referring to Ian's case, REIA said “If the seller wasn’t prepared to sell at $390,000, he shouldn’t have agreed to the property being advertised at that price.”
Daniel from Tasmania received a wide range of estimates for his property. The difference between the lowest and highest figures in the range was $170,000.
Daniel felt one agent grossly underestimated his property. “Initially, a value of $420,000 was suggested. The agent watched our reaction carefully, and when I suggested he return to the office and prepare a written appraisal, he immediately suggested he had underestimated and the value would be closer to $450,000. When we continued to insist on this in writing, he became embarrassed and apologised for making such a foolish mistake. His later appraisal was very vague and not in writing.”
Several representatives from another agency came to value the same home a week later, and all differed significantly on their appraisals. “This time, the range was $550,000 to $650,000,” Daniel says. “None of the appraisals were based on factual research, such as rates, relevant comparisons and land values. They were all based on the agents' ‘considered opinions’.”
A third agent provided an estimate range of $635,000 to $645,000, after more thorough and diligent research, according to Daniel. At the time of writing, the property is on the market for $640,000.
Fourth time lucky
Lisa from WA received a wide range of estimated selling prices and was finding it hard to choose between agents, but persistence paid off in the end. “After interviewing four agents in total, we realised we needed something that would definitively differentiate them, as the prices suggested were so varied,” she says.
“We went back to all the agents and requested additional information to help us make our decision. We collected data on a combination of recent sales in the area, length of time on the market, initial listing price versus actual sales price, marketing campaigns (with special attention paid to internet advertising), whether or not they would work with other agents, and their fees, to finally determine who we’d use.”
Lisa ended up choosing the fourth agent she interviewed. “His knowledge of the local area was very good and he’d had a number of recent sales in the area. He explained his costs and let us know straightaway that negotiation was possible, as we were in a price bracket that allowed it.”
Although her house hadn’t yet sold when we went to print, Lisa says her experience so far has been good. “The agent has worked hard and shown a lot of interest. He’s approachable, personable, has a good sales history, knows the area and also has the backing of an experienced sales team.”