The sales data in Melbourne continues to prove beyond doubt that the property prices in Melbourne are not a “bubble.” Since the week ending February 23 this year the only time there have not been over 1000 sales reported to the REIV each week, have been holiday weekends. 5 months of data showing 1000 sales per week is not an anomaly or a bubble it is a trend.
“Too cheap – and you can quote me” Herald Sun Saturday July 11
“Can I quote you” Herald Sun Sunday July 12
“Price discrepancies anger home buyers” Herald Sun Monday July 13
There have been several articles and comments in the Age newspaper as well.
Underquoting seems to be the catch cry of many media and professional commentators. I attended an auction two weeks ago that was quoted as “over $830k”. This beautiful property was on excellent land, was soundly built and had everything you would want from a home in the area. As I walked from the open for inspection 3 weeks prior I had said to the agent I would give him $1M right now for the property. He explained to me that his vendors wanted to go to auction. He didn’t think he would get that figure. The property sold for $1.260M. I did not think it was worth that the evident comparables put good buying around $1M – $1.1M easily, but two people fought out the auction to the final figure. Most other purchasers fell away between $1M & $1.1M
Was this property underquoted? Would the vendor have taken something close to $830k on the day? Had they quoted $830 – $900k I would have thought the quote a little low but not enough to warrant even a comment. The property was on the market in the low $900’s. So if nobody bid over $950k then the property would have been sold for that amount. And it may have sold cheaper than this if the bidding had not reached $950k.
If competition takes a property well above the asking price, this is due to the good work of the selling agent. The selling agent is working for the vendor not the purchaser. If a purchaser wants to save money on needless inspections for properties they have absolutely no chance on, if they want to know what is likely to purchase a property then they should hire an expert to work for them. A good buyer’s advocate who is constantly buying property all the time will know what is likely to happen to any given property they are looking at.
I do think if an agent has received an unconditional offer above their advertised price they should change their quote if they don’t accept. This happen everyday and I think this is unfair. I am also not sure that a 20% margin is an expected amount for the quote to be below the reserve. But it is extremely rare for a property to sell more than 10% away from the expected price of a professional analysing the market; whether that be a selling or a buying agent’s appraisal.
Just because you see one result, this does not mean you understand the market. There was a very strong result at an auction I attended in Sandringham on Saturday. Approximately 2600sqm of land with a derelict house sold for $3.350M. This would make people think the land value in the area was worth about $1290 per sqm. It is only on further investigation you would find out there was a covenant on the land limiting the property to only 2 house sites and therefore substantially lessening the value per sqm. Sandringham property sells for $1400 – $1500 per sqm for large house sites of approximately 1000sqm.
There are also plenty of agents out in the market at the moment that genuinely do not have the experience to know what the property will sell for. There are some properties that are difficult to estimate, such as the example above. Other properties are difficult because the agents do not realise that they may have the only property of its type in a much broader area than they are used to dealing in. For example, if there were a distinct lack of single fronted period homes in Northcote, an agent may realise he has a good property and has the only one in Northcote and Thornbury, but he may not realise he has the best single fronted home in Northcote, Thornbury, Preston, Fitzroy north, Carlton North, Fairfield and Alphington. He may not deal in these areas, but a good buyer advocate will take all this into account.
Unfortunately, there are plenty of selling agents who will put a bait price out to the market simply to gather names for further marketing, either to on sell them or to use in their own future campaigns. These are the unscrupulous agents that should be stopped by Consumer Affairs Victoria. Any selling agent that is breaking the law, or doing anything that simply benefits the agent to the detriment of both the vendor and other purchasers should be stopped.
You must remember selling agents work for the vendor. It is a bit unrealistic to expect a professional negotiator, who is being paid by the vendor, to do anything to assist the purchaser. If purchasers want to save money, be successful at auctions and in private sale negotiations, find properties that are not yet advertised on the open market, or simply want to save time, they should engage a buyer’s advocate.
Any good negotiator in any sales field anywhere in the world will tell you: “Never let the salesman deal directly with the decision maker.” If you do not know what this means you really do need an advocate working for you. If you do know what it means call us for a free no obligation meeting and we can help you purchase your new home.