April 23, 2024 • 8 mins
In this edition of Talking Real Estate, 2GB's Luke Grant and Peter O'Malley discuss Underquoting, and why 20% is the new 10%. Learn more about the insidious nature of underquoting and arm yourself with the knowledge to help avoid being caught in the trap yourself.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is our house.
And now Talking Real Estate.
Now, of course, the termunderquoting stirs a fair bit of
annoyance, doesn't it, amongsthome buyers who find themselves
attending auctions whereproperties sell for much more
than expected.
New underquoting laws appliedto the sale of residential
property from January 1 back in2016 to give clearer rules for
(00:25):
agents around the quoting ofproperty prices.
But despite it being illegal,suggestions are it continues.
And it's not just continuing,it might well be getting worse.
Now, according to PeterO'Malley from Harris Partners,
who will join me in a second,maybe five 20% is a new 10% when
(00:45):
it comes to underquoting.
It was seven.
Peter O'Malley from HarrisPartners.
Speaker 2 (00:49):
Good morning, luke.
Nice to see you.
You well, yeah, very well,thank you.
Busy day today, very busy.
Yes, saturday's always a goodday out in the field.
Speaker 1 (00:57):
Of course, thank you for coming in 20%.
The new 10% Is that it the new10%.
Speaker 2 (01:07):
Is that it?
It shouldn't be that way, butit is.
Luke, and what's happening hereis that in every marketplace,
it only takes one agency toadopt this strategy and make the
vendor a willing participant init, and then the other agent's
listings suddenly lookoverpriced relative to the
property that's beingunderquoted by 20%.
So they're forced,inadvertently, to follow suit,
and that's what's happeningright across the city.
It's not a regional thing.
Buyers agents have said to methat they're regularly seeing
(01:30):
properties pass in well above10% from what the agent's guide
was, which is the clearest signthat it's an underquoted
property.
Speaker 1 (01:38):
How do we get something with a bit more
meaning going on here, the theagent's guide, I mean.
I know it's a marketplace andso things will fluctuate.
Are there things we can do thatwe're not doing?
Speaker 2 (01:50):
I believe there certainly are.
Speaker 1 (01:51):
Okay, tell me.
Speaker 2 (01:52):
The first is when we look at the stamping out of
dummy bidding.
Vendors could face a fine aswell as the real estate agent if
they were shown to be partakingin dummy bidding, but when it
comes to underquoting, there'sno such penalties in place for
vendors.
So real estate agents, byfudging the paperwork, are
making vendors willingparticipants in the underquoting
(02:14):
, and they're all cleaning it upon the paperwork.
The people that areinvestigating these instances
are not trained well enough inthe real estate field to know
what an underquote is and whatisn't.
That's unfortunate, but likemost government departments,
they're stretched pretty thinlyat the moment.
Speaker 1 (02:29):
So is it that they're stretched or they're not really
real estate market aware?
They're not an agent, formeragent or someone that works in
an agency.
Speaker 2 (02:38):
That's right.
They're just not real estateaware enough Right.
Okay.
So I think and I have thoughtabout the question you've just
asked, luke, I think the onethat ices it is if every
property that passes in by morethan 10% above the agent's
reserve should be investigatedautomatically and the agent and
the vendor should be on the hookto explain why did this
(02:59):
property pass in for more than10% above the price guide during
the advertising campaign.
That there would flush outwhether it was an underquote or
the vendors do blindside realestate agents on the morning of
the auction by having anunrealistically high reserve or
a change in motivation.
Speaker 1 (03:16):
Tell me what that is.
How does that look like?
You get a phone call, do you?
Speaker 2 (03:20):
You have to have a written letter that goes to the
auctioneer before the auctioncommences stating the vendor's
reserve, and many agents willattest that they have been
blindsided and I accept thathappens in the marketplace.
Speaker 1 (03:31):
So on the day or the day before I now want the
reserve an extra $100,000 higher.
Speaker 2 (03:36):
That's right, but I now want the reserve, you know,
an extra 100 grand higher.
That's right, right and thatcan clean, bowl the campaign and
mess it all up.
But that's the minority ofinstances.
It takes $10,000 to $12,000 inmarketing and probably another
$10,000 in styling andpreparation costs to be on the
market.
So on auction day, vendors wantit to be a success.
They don't want it to pass in.
So if it passes in by more than10% than what the real estate
(04:00):
agent told the buyers for theprevious four weeks, there has
to be questions asked andpenalties apply where
underquoting is evidentlyoccurred.
Speaker 1 (04:08):
Yeah, so again, that would be something supported by
the majority of agents.
Do you think?
Is it driving people nuts thatmuch that this needs to be
stamped out, and quickly?
Speaker 2 (04:18):
It is.
It's driving buyers, sellersand agents nuts.
It only takes one firm in arespective marketplace to start
underquoting by 20% and it ripsthrough the marketplace like a
bushfire Right.
So there's a lot of agents thatdon't like standing at a front
door on a Saturday morningtelling people they can buy a $2
million house for $1.6 million.
(04:38):
But, by the same token, if theystand at the front door telling
people this is for sale foraround $2 million and a
comparable home down the road isbeing marketed for $1.6 million
, where do you think the buyersare going to?
go Of course, and that's theproblem, why it needs to be
cleaned up.
We have to accept that the lawsthat were introduced in 2016,.
You have to accept that thelaws that were introduced in
(04:59):
2016, as you've just said, havenot worked.
Are there serial offenders?
Without naming anyone?
Do you see when something isput on the market and you can
see who the agent is?
Do you automatically?
Is it that rife that you cantell if it goes to agent ABC In
the markets that I operate in,you know who will under quote by
15 to 25%.
Speaker 1 (05:20):
Seriously.
Yeah, it's that well known.
Speaker 2 (05:22):
So I've had a client that made a bid of 1.9 million
at an auction a few weeks ago.
The price guide during theauction was 1.9 million.
He offered the price guide thatthe agent had quoted to every
buyer for four weeks.
In the auction he said we'renot taking bids under 2 million.
The property passed in and hewas told at that point the
reserve was $2.4 million.
(05:43):
That is what's going on out atauctions in Sydney at the moment
.
Yeah, wow, yeah.
Speaker 1 (05:50):
Gosh, what's the market like?
Speaker 2 (05:54):
It's good.
You need to have your propertypresented correctly.
I think the market-.
Speaker 1 (05:57):
What does that?
Speaker 2 (05:58):
mean you just can't put a property on the market
without having the styling right, the maintenance done.
The market is punishinganything at the moment that is
not on point.
So there's a flight to quality.
There's buyers in themarketplace Okay, baby boomers
downsizing and internationalbuyers coming in on the weak
(06:19):
Australian dollar are prettyformidable bidders in the
marketplace at the moment.
So we've had 14 interest raterises.
Everyone knows that, but fourof those 14 were double.
They were 0.5% increases in2022.
So we've had the equivalent of18 interest rate rises in the
last two years, luke, and theproperty market is still edging
(06:40):
up.
The rate of growth in 2024 hasslowed from what was happening
in 2023, but I think, given whatthe market has faced, the
market's in pretty good nick.
Speaker 1 (06:51):
So the international buyers you and I had this
conversation many years ago, Iremember, and you said at the
time, if I remember correctly,that they were a major influence
in the marketplace.
Are they still Because thegovernment, you know, a week or
two back, was saying we're goingto make it much harder, they're
going to up taxes or fees orwhatever?
Speaker 2 (07:10):
Yeah, well, up until that hits the marketplace,
international buyers are playinga big role.
When we spoke about it a fewyears ago, luke, international
buyers, or the phraseinternational buyers, was code
for Chinese.
Speaker 1 (07:21):
Yes.
Speaker 2 (07:22):
Let's be honest, spot on.
That is not the case anymore.
Vietnamese buyers, people whomight be earning American
dollars or, coming from America,the Great British Pounds
there's many currencies thathave performed particularly
strongly against the Aussiedollar.
Speaker 1 (07:37):
Yeah.
Speaker 2 (07:38):
And the other thing about this immigration surge
that we're experiencing they'reafter skilled migrants.
So skilled migrants meanspeople coming in with money
against a weak Australian dollarand they're getting here, and
Australian real estate is notexpensive to them, it's highly
affordable.
Speaker 1 (07:55):
Hence they're such a formidable force in the
marketplace to them it's highlyaffordable Right, hence they're
such a formidable force in themarketplace.
Yeah, yeah, and in relation tothe rental market, I think we
were talking off air.
You were saying winter's not agood time to have your property
vacant, but it seems, with ahuge population growth and not a
lot of new supply, renters arebeing squeezed.
I mean supply and demand theyare.
(08:16):
Is it easing or not?
Speaker 2 (08:18):
To a degree, and that's seasonal and it happens
every year, right.
So every calendar year themarket experiences a fairly
aggressive price growth in therental market through until
about Easter.
From Easter to spring itsettles down a bit Right.
As we know, due to theimmigration issue the rental
market is not easy for tenants,but it's not as hard as what it
(08:40):
was going back to January andFebruary.
But they don't want to overplaytheir hand.
By the same token.
Speaker 1 (08:45):
Great stuff, mate Good to see you again, peter.
Thank you, luke, you too, peterO'Malley from Harris Partners.
This is our house.
And now Talking Real Estate.
Now, of course, the termunderquoting stirs a fair bit of
annoyance, doesn't it, amongsthome buyers who find themselves
attending auctions whereproperties sell for much more
than expected.
New underquoting laws appliedto the sale of residential
property from January 1 back in2016 to give clearer rules for
(00:25):
agents around the quoting ofproperty prices.
But despite it being illegal,suggestions are it continues.
And it's not just continuing,it might well be getting worse.
Now, according to PeterO'Malley from Harris Partners,
who will join me in a second,maybe five 20% is a new 10% when
(00:45):
it comes to underquoting.
It was seven.
Peter O'Malley from HarrisPartners.
Speaker 2 (00:49):
Good morning, luke.
Nice to see you.
You well, yeah, very well,thank you.
Busy day today, very busy.
Yes, saturday's always a goodday out in the field.
Speaker 1 (00:57):
Of course, thank you for coming in 20%.
The new 10% Is that it the new10%.
Speaker 2 (01:07):
Is that it?
It shouldn't be that way, butit is.
Luke, and what's happening hereis that in every marketplace,
it only takes one agency toadopt this strategy and make the
vendor a willing participant init, and then the other agent's
listings suddenly lookoverpriced relative to the
property that's beingunderquoted by 20%.
So they're forced,inadvertently, to follow suit,
and that's what's happeningright across the city.
It's not a regional thing.
Buyers agents have said to methat they're regularly seeing
(01:30):
properties pass in well above10% from what the agent's guide
was, which is the clearest signthat it's an underquoted
property.
Speaker 1 (01:38):
How do we get something with a bit more
meaning going on here, the theagent's guide, I mean.
I know it's a marketplace andso things will fluctuate.
Are there things we can do thatwe're not doing?
Speaker 2 (01:50):
I believe there certainly are.
Speaker 1 (01:51):
Okay, tell me.
Speaker 2 (01:52):
The first is when we look at the stamping out of
dummy bidding.
Vendors could face a fine aswell as the real estate agent if
they were shown to be partakingin dummy bidding, but when it
comes to underquoting, there'sno such penalties in place for
vendors.
So real estate agents, byfudging the paperwork, are
making vendors willingparticipants in the underquoting
(02:14):
, and they're all cleaning it upon the paperwork.
The people that areinvestigating these instances
are not trained well enough inthe real estate field to know
what an underquote is and whatisn't.
That's unfortunate, but likemost government departments,
they're stretched pretty thinlyat the moment.
Speaker 1 (02:29):
So is it that they're stretched or they're not really
real estate market aware?
They're not an agent, formeragent or someone that works in
an agency.
Speaker 2 (02:38):
That's right.
They're just not real estateaware enough Right.
Okay.
So I think and I have thoughtabout the question you've just
asked, luke, I think the onethat ices it is if every
property that passes in by morethan 10% above the agent's
reserve should be investigatedautomatically and the agent and
the vendor should be on the hookto explain why did this
(02:59):
property pass in for more than10% above the price guide during
the advertising campaign.
That there would flush outwhether it was an underquote or
the vendors do blindside realestate agents on the morning of
the auction by having anunrealistically high reserve or
a change in motivation.
Speaker 1 (03:16):
Tell me what that is.
How does that look like?
You get a phone call, do you?
Speaker 2 (03:20):
You have to have a written letter that goes to the
auctioneer before the auctioncommences stating the vendor's
reserve, and many agents willattest that they have been
blindsided and I accept thathappens in the marketplace.
Speaker 1 (03:31):
So on the day or the day before I now want the
reserve an extra $100,000 higher.
Speaker 2 (03:36):
That's right, but I now want the reserve, you know,
an extra 100 grand higher.
That's right, right and thatcan clean, bowl the campaign and
mess it all up.
But that's the minority ofinstances.
It takes $10,000 to $12,000 inmarketing and probably another
$10,000 in styling andpreparation costs to be on the
market.
So on auction day, vendors wantit to be a success.
They don't want it to pass in.
So if it passes in by more than10% than what the real estate
(04:00):
agent told the buyers for theprevious four weeks, there has
to be questions asked andpenalties apply where
underquoting is evidentlyoccurred.
Speaker 1 (04:08):
Yeah, so again, that would be something supported by
the majority of agents.
Do you think?
Is it driving people nuts thatmuch that this needs to be
stamped out, and quickly?
Speaker 2 (04:18):
It is.
It's driving buyers, sellersand agents nuts.
It only takes one firm in arespective marketplace to start
underquoting by 20% and it ripsthrough the marketplace like a
bushfire Right.
So there's a lot of agents thatdon't like standing at a front
door on a Saturday morningtelling people they can buy a $2
million house for $1.6 million.
(04:38):
But, by the same token, if theystand at the front door telling
people this is for sale foraround $2 million and a
comparable home down the road isbeing marketed for $1.6 million
, where do you think the buyersare going to?
go Of course, and that's theproblem, why it needs to be
cleaned up.
We have to accept that the lawsthat were introduced in 2016,.
You have to accept that thelaws that were introduced in
(04:59):
2016, as you've just said, havenot worked.
Are there serial offenders?
Without naming anyone?
Do you see when something isput on the market and you can
see who the agent is?
Do you automatically?
Is it that rife that you cantell if it goes to agent ABC In
the markets that I operate in,you know who will under quote by
15 to 25%.
Speaker 1 (05:20):
Seriously.
Yeah, it's that well known.
Speaker 2 (05:22):
So I've had a client that made a bid of 1.9 million
at an auction a few weeks ago.
The price guide during theauction was 1.9 million.
He offered the price guide thatthe agent had quoted to every
buyer for four weeks.
In the auction he said we'renot taking bids under 2 million.
The property passed in and hewas told at that point the
reserve was $2.4 million.
(05:43):
That is what's going on out atauctions in Sydney at the moment
.
Yeah, wow, yeah.
Speaker 1 (05:50):
Gosh, what's the market like?
Speaker 2 (05:54):
It's good.
You need to have your propertypresented correctly.
I think the market-.
Speaker 1 (05:57):
What does that?
Speaker 2 (05:58):
mean you just can't put a property on the market
without having the styling right, the maintenance done.
The market is punishinganything at the moment that is
not on point.
So there's a flight to quality.
There's buyers in themarketplace Okay, baby boomers
downsizing and internationalbuyers coming in on the weak
(06:19):
Australian dollar are prettyformidable bidders in the
marketplace at the moment.
So we've had 14 interest raterises.
Everyone knows that, but fourof those 14 were double.
They were 0.5% increases in2022.
So we've had the equivalent of18 interest rate rises in the
last two years, luke, and theproperty market is still edging
(06:40):
up.
The rate of growth in 2024 hasslowed from what was happening
in 2023, but I think, given whatthe market has faced, the
market's in pretty good nick.
Speaker 1 (06:51):
So the international buyers you and I had this
conversation many years ago, Iremember, and you said at the
time, if I remember correctly,that they were a major influence
in the marketplace.
Are they still Because thegovernment, you know, a week or
two back, was saying we're goingto make it much harder, they're
going to up taxes or fees orwhatever?
Speaker 2 (07:10):
Yeah, well, up until that hits the marketplace,
international buyers are playinga big role.
When we spoke about it a fewyears ago, luke, international
buyers, or the phraseinternational buyers, was code
for Chinese.
Speaker 1 (07:21):
Yes.
Speaker 2 (07:22):
Let's be honest, spot on.
That is not the case anymore.
Vietnamese buyers, people whomight be earning American
dollars or, coming from America,the Great British Pounds
there's many currencies thathave performed particularly
strongly against the Aussiedollar.
Speaker 1 (07:37):
Yeah.
Speaker 2 (07:38):
And the other thing about this immigration surge
that we're experiencing they'reafter skilled migrants.
So skilled migrants meanspeople coming in with money
against a weak Australian dollarand they're getting here, and
Australian real estate is notexpensive to them, it's highly
affordable.
Speaker 1 (07:55):
Hence they're such a formidable force in the
marketplace to them it's highlyaffordable Right, hence they're
such a formidable force in themarketplace.
Yeah, yeah, and in relation tothe rental market, I think we
were talking off air.
You were saying winter's not agood time to have your property
vacant, but it seems, with ahuge population growth and not a
lot of new supply, renters arebeing squeezed.
I mean supply and demand theyare.
(08:16):
Is it easing or not?
Speaker 2 (08:18):
To a degree, and that's seasonal and it happens
every year, right.
So every calendar year themarket experiences a fairly
aggressive price growth in therental market through until
about Easter.
From Easter to spring itsettles down a bit Right.
As we know, due to theimmigration issue the rental
market is not easy for tenants,but it's not as hard as what it
(08:40):
was going back to January andFebruary.
But they don't want to overplaytheir hand.
By the same token.
Speaker 1 (08:45):
Great stuff, mate Good to see you again, peter.
Thank you, luke, you too, peterO'Malley from Harris Partners.
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