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Property Underquoting: How to Address It in Real Estate Appraisal and Negotiation

The number one grievance I hear from clients is about how real estate agents guide prices for their property for sale.

 

There certainly are some agents deliberately quoting significantly lower than what a property should sell for, intending to create more hype and a larger pool of potential buyers.

 

They are the exception though and my experience is that most agents operate within their rights and in good faith.

 

Ultimately it’s on you the prospective buyer to determine the value and likely sale price of a property. To do so you should understand the sales appraisal process, market momentum, and supply-demand balance in the areas you’re hunting.

 

It’s common for a vendor to meet with two to four agents before choosing one to list with.

 

Agent and vendor will sign an agency agreement that commonly indicates a price range the agent calculates the property will sell for with a max allowable variation of 10% from low to high end.

 

Yet markets are dynamic. Weeks and months pass between a listing presentation and listing. Comparable properties come and go. Competition from other buyers fluctuates.

 

The agent has supplied an educated guess. It’s your job to gather and assess market intel so you can independently determine the final sale price and make a decision whether that is a price you’re happy to pay.

 

Asking the agent what price the vendor is expecting may elicit a more accurate number than asking for a ‘price guide’

 

Having an understanding of similar properties either recently sold, or sold in similar market conditions is critical.

 

If you don’t want to pay for an RPData subscription you can perform a ‘sold’ search on Domain. Ensure you compare apples with apples- land size, property size, age, condition, aspect. ‘Comparable’ can often mean not just in the same suburb, but on the same street, or in the same block.

 

Understand market momentum. If you’re purchasing in a hot market a rising tide can lift prices by several percentage points between first inspection and auction day.

 

Understand the competition. Fewer buyers in the market coupled with a reasonable supply of properties at a traditionally slower time of year could well temper what you believe the final price should be. This will involve you getting out there and inspecting as many properties as you can on a weekly basis. Perusing the media reports is no substitute for boots on the ground research.

 

Stay informed of macro factors. For example when the First Home Loan Deposit Scheme (FHLDS) was introduced it increased many buyer budgets to $700k (in metro Sydney) which pushed the selling price and of many properties in the $650k range up to $700k practically overnight.

 

Your research will support your decision and position whether that’s to make a pre-market offer, bid high at auction, or move on to a better deal.

 

Using your informed judgment means no more irrational anger toward selling agents, more peace of mind, and a better purchase outcome.

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