Everyone loves to hate estate agents. It’s a national sport: like BBQs on election day and booing at Collingwood, hating estate agents is rooted deep in our national lizard brain.
That’s how The Buyer Who Cried Underquoting article by Iolanthe Gabrie starts off. At the time of writing, the post has been shared over 800 times on various social media networks. In particular the article has been widely shared within the real estate industry – a call to arms.
It’s easy to understand why: … They pass in homes at auction willy-nilly for much more than they’re worth, and they’re so crooked on price it’s amazing they can walk properly … Who are these underquoting bastards, anyway?
The Roy Morgan Image of Professions Survey says Australians do not trust real estate agents.
But why? Is it just a few bad apples which make the rest of the industry look bad or is there a bigger problem?
I’ll tell you who these agents are. They’re a soft target for easy, lolling Saturday night media hate and a scapegoat for lazy governments. They’re also you and I every time we sell a property, their actions and approach to marketing and negotiation driven by their task: which is to sell your property for the most amount possible.
Some real estate agents have been known to behave poorly towards both buyers and sellers.
There are few industries less understood than real estate. The public perception of the industry: hijinks, dodgy greaseballs, genuine influence over the market and money – LOTS OF MONEY – is all complete rubbish.
This is the same we hear from veteran real estate industry folk too. Those fancy cars you see junior agents driving are usually highly leveraged to give the impression of success.
Most estate agents (and for the purposes of this article I’m referring to selling agents) are not successful, and make around 50k per year – working six days and evenings. Only the very few – the most talented, intelligent and competent – manage to eke out longterm sales careers and make good incomes. Most agents drop out after a few years of toil, and those that remain must become battle-hardened to help the Australian population transact housing.
Why is this?
Shouldn’t real estate agents be of the same skill as an accountant, financial planner or equivalent?
Unlike managed funds, shares and other asset types that are governed by regulations and overseen by ASIC, the property sector is totally unregulated and sharks abound in the murky real estate waters, waiting to pounce on unsuspecting investors at every opportunity.
The property industry is guilty of dumbing down what is in fact a complex process – investing in property. Selling agents, project markets, property spruikers and developers offer education, one stop shops, integrated programs and all sorts of tricky strategies to sell what is frequently poor performing investment property, and they do this for their own and their vendors benefit.
Australians are appalling when it comes to their attitude towards negotiation. They’ll kill you for a dollar.
The real estate agent’s job is to represent the vendor’s position. However, naive home buyers which swallow biased “free” advice do so at their own peril.
Reality check: estate agents have no control over the market. They are not selling their own property. Their vendors are, and their vendors are in control of the reserve they set and the price they’re ultimately willing to sell their home at. Once their property is on the market (i.e. it has reached the reserve at auction and is about to be sold), the vendor also has no control over the price their property sells for. Those in control are the buyers, who can keep bidding until they wish to stop. Value for these competing buyers is entirely personal: it has nothing to do with the price an advocate might recommend you pay for a property.
Buyers do determine the price homes sell for.
However, experienced real estate agents do accurately quote property prices regardless of whether the market is moving up or down.
Some real estate agents market their quoting accuracy as a differentiator from their competitors.
Most gallingly for disappointed buyers at auction, the price those willing to compete on property are willing to pay is disconnected from any quote range advertised, any vendor’s reserve or any council rates estimation of value.
We recommend that home buyers use multiple sources to form a view on property values.
What really wastes home buyers time and money is when real estate agents pass in properties which receive bids above their quote range.
Who’s to blame? Why, the agent of course. It’s them and their evil underquoting. What utter garbage.
Estate agents hold responsibility for getting their price quotes as accurate as possible, it is illegal to underquote.
Underquoting comes about because real estate agents are either inexperienced (they don’t know their own market) or they are intentionally misleading and deceptive.
Government regulators are beginning to grow some teeth to reduce underquoting in Melbourne and Sydney.
You know who’s not crying underquoting? The vendor who sold their property successfully, the buyer who bought a property successfully. Those focussed on underquoting – and making it the scapegoat for problems of supply and demand – are those who did not actually participate in the transaction.
Even though the successful buyer just racked up $20,880 in hidden costs searching for a property?
Recently, the state government has announced legislation to change the way that estate agents quote – to prevent the disappointment of underquoting …
The proposed Victorian underquoting laws are weak and unenforceable.
New South Wales underquoting laws appear to be having the desired effect, although it is still early days.
Issues regarding new land releases, community housing schemes, appropriate planning permits which the author raises are worthy of a separate conversation. However, they’re irrelevant to the topic of underquoting.
Experienced real estate agents have the knowledge to quote property prices accurately.
Ultimately it is up to agents to choose how to represent (or mis-represent) prices to home buyers.
It’s not action, you know. These changes will do nothing but confuse Victorian buyers for around six months, before well-resourced buyers learn the new pattern of negotiation and begin to buy with fervour again. Think carefully: it’s not the agent that’s to blame for market forces – no matter how spivvy their car or smarmy their Facebook page. The people to blame are ultimately you and I, and the economy and democracy we participate in.
Buyers make the market. Real estate agents are one point of communicating prices, but they should not assume they are the sole point anymore.
Welcome to the era of information transparency. Buyers, sellers and agents can all win.