REALas Australia’s most accurate property price predictions
REALas Australia’s most accurate property price predictions

Step Quoting is Underquoting

Step Quoting is Underquoting
March 26, 2015 Josh Rowe

Step quoting is a form of underquoting.  Some real estate agents use this dirty, grubby and misleading tactic of gradually increasing the quoting price throughout a marketing campaign to lure in unsuspecting home buyers.

Buyer’s advocate David Morrell, speaking with The Age, estimates that up to 50 per cent of agents in some Melbourne suburbs are “step quoting” to lure buyers.  He said agents were also increasingly opting to quote verbally at open for inspections rather than publishing a price on advertisements.


Source: The Age

Last Saturday the realAs.com team ventured out to Melbourne’s Eastern suburbs – a known hot spot for underquoting – with a television crew to witness the practice first hand.

The auction of 67 Doncaster East Rd, Mitcham VIC was publicly quoted by Noel Jones – Mitcham real estate agency at $520,000+ on 22 February 2015.  The week prior to auction the price guide was no longer available on the public real estate listing for the property.

Home buyers who contacted the real estate agency the week before the auction were told by email “we currently have buyer interest in the high $500,000’s to early $600,000’s”.  That’s a 15% or $80,000 increase on the original public real estate agency price quote.

On the day of the auction after a vendor bid of $560,000, the real bidding started at $570,000.

At $620,000 I asked the auctioneer if the property was on the market – the answer was a quick NO!

Once the bidding reached $630,000 the property was then declared on the market.  This was 21% or $110,000 above the original public real estate agency quote.

The bidding continued and the property sold for $715,000 which was 38% or $195,000 above the original real estate agency quoted price.

The realAs.com prediction of $651,000 was 10% or $64,000 off the final sale price.

The real estate agency was interviewed by the television crew and suggested that the reason for getting the price guide wrong was because of the rising property market.

Unfortunately that excuse falls on deaf ears when home buyers experience the frustration of wasted time, money and broken hearts from missing out on the homes they thought were in their price range to buy.

However, it’s not fair of us to only refer to one case for this particular real estate agency, so here are their auction results from February 2015, the original agent quoted price, and the realAs.com predictions.

The average difference between their original public quoted price and the sold price was 21%, the realAs.com predictions were just 7% off on average for this particular agency.

Street Suburb Sold For Original Agent Quote Sold vs Agent Quote realAs.com Predicts Sold vs realAs.com
56 Heatherdale Rd Mitcham $815,000 $600,000 36% $724,000 13%
29 Husband Rd Forest Hill $801,000 $590,000 36% $689,000 16%
17 Kingsley Ave Vermont $765,500 $590,000 30% $689,000 11%
56 Heatherdale Rd Mitcham $762,000 $600,000 27% $724,000 5%
7/15 Orion St Vermont $680,000 $540,000 26% $615,000 11%
1/8 Halls Parade Mitcham $638,000 $520,000 23% $613,000 4%
1/5 Linlithgow St Mitcham $630,000 $520,000 21% $613,000 3%
10 Glenburnie Rd Mitcham $700,000 $580,000 21% $681,000 3%
1/21 McGhee Ave Mitcham $589,000 $500,000 18% $599,000 2%
11 Browns Rd Nunawading $815,000 $720,000 13% $848,000 4%
14 Eram Rd Box Hill North $826,000 $740,000 12% $868,000 5%
58 Creek Rd Mitcham $1,055,000 $950,000 11% $1,083,000 3%
13 Quarry Rd Mitcham $795,000 $720,000 10% $848,000 6%
22 Toomey St Vermont $688,000 $650,000 6% $758,000 9%
AVERAGE 21%   7%

Further reading on step quoting:

 

 

 

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    The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of REALas.


9 Comments

  1. Michael 5 years ago

    Another great article from the team with some real quantitative analysis of underquoting in the market. In the absence of proper regulation by the state government or the REIV, evidence backed efforts to name and shame chronic underquoting agencies is the best tactic available. Keep up all the hard work!

  2. Brett 5 years ago

    Come to Adelaide, you will be whinging about agents over quoting. Some prices are not even making the 2009 purchased price. It’s not the agents fault the market is willing to pay more for the property than the market price based on what’s previously sold in the area. In fact prices change daily. It could be a better exchange rate. It could be school zoning boundaries changed. It could be development policy changed or announced. It could be university expansion. Better Visa requirements. Anything. These are changes that different people place importance on and will pay. I have watched open videos by these agents you are investigating. Sometimes there’s 150 groups at the open. In 30 minutes! So if that’s not buyer demand pushing the price up what is? Adelaide 6 groups is good. However one particular suburb will then consistently get 30 to 40 because of the demand.

    • Author
      joshrowe 5 years ago

      Brett, Generally for private sales (which is the most common way to sell property across Australia) prices do start and come down during a marketing campaign. So home buyers should be wary over “over quoted” private sale prices. If you take a look at realAs predictions for private sales you are likely to see prices which are lower than the real estate agent quote.

  3. Ditto 5 years ago

    As an ETHICAL, honest agent myself I can tell you that good agents should be able to quote within 5-10% based on comparable local sales. This is an excellent article and I have little sympathy for the agents involved. It is OUTRAGEOUS to be achieving sales at 36% above the quoted price guide. This is blatant under quoting to attract a crowd and it grossly unfair on the buyers. It gives good agents a bad name and I hope they keep the pressure on them because if they’re being honest they won’t need to worry will they !

  4. John Keating 5 years ago

    So called step-quoting is simply another creative and odious ploy by some agents to smokescreen or conceal the prices they know their vendors really want.

    As a naive attempt to cover-up or legitimise the deceitful practice of underquoting, step-quoting is an even worse practice.

    Auction rules should be reformed to require vendors’ reserve prices to be published in all auction advertising.

  5. Charli 5 years ago

    142 Junction Road, Nunawading was quoted openly at $580,000 PLUS by the agent and sold for $920,000 on the day. The property was NOT announced on the market until such time as around the $800,000 mark so ISNT this UNDER QUOTING?

    They later went on to boast about the somewhat 58% increase on their facebook page which has now been removaed. The price was immediately removed from all of their marketing and changed to PRIVATE TREATY no one is the wiser that this was all a massive joke!

  6. Luke 5 years ago

    Until it is legislated and there is widespread change, sellers have to underquote because it is expected. If you quote the real price, buyers add 20% and price themselves out.. Should enforce disclosure of reserve price.

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