By Mark Errichiello
I am a second generation Melbourne-based licensed estate agent who had worked more than 20 years in the real estate industry. The initial 14 years in sales, auctions and property management and the most recent seven years as a buyers & vendors advocate.
I’ve been around real estate agents and internal agency operations in changing markets and legislation reform my 40 years in Melbourne.
This argument of changing legislation and best practice with quoting comes up every time we are in a rising market. Majority try to do the right thing but like any industry there’s always an exception with a group that will try to dance around the rules, regardless of what legislation changes.
This time there’s more stakeholders armed on social media with opinions and more professionals on both sides, sales agents and buyer’s agents. Hopefully we get somewhere collaboratively.
There has been an ongoing debate and a question proposed that a solution to underquoting would be to publish reserve prices and make it mandatory for a vendor to do so. My personal position on this topic is, although it can be useful for a buyer to know a vendor’s reserve price expectation, it should not be made mandatory.
We can’t take away a seller’s right to their own due diligence. The focus must be on the sales agents’ practice and improvement.
The underquoting issue needs to be investigated case by case where there is the exception of sales agents blatantly underquoting and the legislation allows for that when basic rules aren’t followed. In a rising market it is highlighted more as agents’ estimates can’t keep up with demand and sales prices achieved (some leveraging and taking advantage of this short-lived loophole before time catches up and comparable sales that can’t be ignored). There must be some consideration for general agents who try to do the right thing.
Separate to the sales agents’ estimate, at the point of going live with a listing for sale online or off-market, not all vendors and sales agents will know what price to set as a reserve price until they have genuine current market interest and feedback after their particular property is available on market to inspect and offered to buyers to express interest.
It can be easier to set a reserve price expectation with certain property types and locations which deliver consistent predictable results based on quality, supply and affordability. For example, some apartment and unit dwellings may not have much of a variation in price over long periods in the market, unlike the rapid growth and demand experienced during the recent six-month period of the property market throughout many well established inner-city, bayside and regional suburbs with sought after townhouse and house property types.
All buyers need to invest time and money into due diligence to make an informed decision.
The focus must be on adjusting the sales agents’ practice and improvement measures and the buyers’ expectations of sales agents and vendors. There must be a responsibility on the buyer to self educate and research or hire a professional independent buyer’s agent.
Regardless, if engaging a professional buyer’s agent to help or if acting alone; knowledge and market research will help validate your perspective on the property’s value rather than relying on the vendors’ position or the sales agent. It’s the buyers in the market who will set the value. Researching the demographic and competitor appetite for the type of property you are pursuing will also provide another perspective of what you’re up against.
Mark Errichiello is REBAA’s Victorian state representative and the Director of Master Advocates Real Estate Services in Melbourne