Source: Kate Burke, Journalist, Domain
It is one of the most frustrating parts of buying a property – even for the experts.
A dream home turns up in your property search – or, more realistically, a home that will do – that is seemingly within your budget.
You want to buy it, and the owners want to sell for a price, but the agent will not tell you just what that is. Cue an expensive guessing game.
“It's ridiculous; it's very frustrating,” said buyers' agent Peter Kelaher, managing director of PK Property. “Nothing irritates someone more than when an agent is not quoting a price.”
About a quarter of properties headed to auction on Saturday have an advertised price guide. Fewer still hit the market with a price, a move experts say becomes more common in a rising market.
While most agents will provide a guide when contacted, buyers might have to wait weeks instead of days to get an answer. Other agents will not offer one and instead ask the prospective buyer what their budget is. The agent might then suggest the property is within your target range.
Then there's the minority who will not give any indication, noting it's at the request of the property owners who want to test where the true market value lies.
“Because of the change in the market … agents are really cagey about giving a guide,” said buyers' agent Michael Ossitt, director of Strand Property Group. “They say 'if we set it too low and it sells really high, we'll get reported for underquoting. Set it too high, and we miss out on potential buyers'.”
Some started using the rising market as an excuse not to provide a price late last year, Mr Ossitt said, and were likely to continue to avoid giving a clear answer.
“You'll probably see it right now … what the agents will say is, 'we've had a break, we haven't had enough results in 2020 to really say where the market is going',” Mr Ossit said.
“Some agents will never give you a price,” he said. “As a buyer, it is the most frustrating thing.”
When guides are provided, experts say, they are increasingly falling short, leaving hopeful house hunters disappointed when a price soars out of their reach.
Mr Kelaher said there had been a rise in underquoting, with agents basing prices on cooler market conditions seen early last year. However, he stressed that just because a property sold for more than expected, it did not mean underquoting had intentionally occurred.
“Agents don't know what people are willing to pay at the moment because some people are going stupid … so, instead of quoting within a 10 per cent range, they can just not quote a price at all [and avoid the risk of underquoting].”
The approach to pricing varies across the country. In Queensland, it is illegal for agents to provide an auction price guide, while in Victoria it is mandatory to give an indicative selling price or price range that is no less than the seller's asking price, the agent's estimated selling prices or any written offers already rejected.
New South Wales sits somewhere in between. It is optional to provide a price but under reforms introduced in 2016 to stamp out underquoting it is illegal for agents to give vague prices (such as offers above $1 million). They also cannot provide a price estimate that is less than what they have reasonably estimated a property to be worth (as recorded in the agency agreement with the seller). A price range can not vary by more than 10 per cent and should be revised if evidence or circumstances change the estimated selling price.
“You have to put a price range in the agency agreement, then the law says you don't have to quote it, that's just stupid,” Mr Kelaher said.
Meanwhile, private treaty sales are being advertised at well above vendor price expectations, Mr Kelaher said. A year ago prices were “right in the firing range” of what a vendor would accept, now a property will be advertised with a price of $600,000 – when the vendor wants $500,000 – to see who will bite.
A rising market can make it harder to gauge a property's worth, and create concerns about underquoting, said Thomas McGlynn, The Agency's head of sales and chief auctioneer. However, a lack of a price guide was more likely to come down to a vendor with unrealistic price expectations, he said, noting owners reacted far more quickly to market upswings than downturns.
“Often the seller won't let them publish a price guide in line with where the market is,” he said. “Then the agent will generally resort to not publishing a price guide and talking about recent sales … and hope buyers provide feedback to help educate the seller.”
However, not providing a guide is a strategy used by some agencies, Mr McGlynn noted, with some agents preferring to get a buyer's budget and then encourage them to engage if the property is somewhat within reach.
“I don't agree with that strategy … I think you'll find a lot of businesses don't either,” he said.
“[Price guides] are far from perfect but it's a hell of a lot better to give some sort of price indication, than none like they do in Queensland,” Mr McGlynn said.
He added agents should not be worried about being transparent about vendor expectations and said The Agency encouraged agents to have agency agreements – detailing the price range the owner is expecting – on display at auctions.
Buyers' agent Brooke Flint of Flint Property said she would question whether to go for a property that did not have a price guide as it was “an annoying strategy”.
She said with some agents scared of giving price guides, buyers should ask for details on what comparable properties were used to establish a price range with the vendor. However, she noted most inner-city agents were still comfortable with giving guides.
Buyers could try to force the hand of the agent by asking for the agreed-upon price range in the agency agreement, Mr Ossitt added but conceded that the average buyer might not have much luck with that approach.
He warned buyers to be careful when relying on the alternative of comparable sales.
“I've seen some agents print a list they say is of area sales. [They are] just houses that sold in the area and half of them are not even comparable, and sold for $200,000 or $300,000 more than what the property [for sale] is worth.”