Interpreting real estate agent’s respective price guide during the 2021 boom has become harder than earning enough money to purchase a property.
The frustrating reality for buyers is each real estate agency tends to take a different approach on how they price their respective listings in the marketplace.
There are a few common ‘price strategies’ agents adopt that are worth being aware of:
The Underquote – the agent deliberately underquotes the price to attract multiple buyers along to the auction. Don’t make the mistake of believing underquoting laws protect home buyers. Unfortunately, these laws are easily flaunted. If the agent’s price guide seems too good to be true, then its highly likely you are being bait priced – there are no bargains in a boom.
Step pricing – the agent starts with a low price that draws buyers to the property. As the interest inevitably builds, the price increases accordingly.
No price – a list of comparable sales is displayed on the Statement of Information or at the open house as market evidence. Whilst the list of recent sales may be suggestive as to the price expectations, be careful to examine the comparability of the properties. This method is not an explicit quote from the agent, therefore removing any chance of being accused of underquoting. The agents advise the result will be determined on the day at the auction. Given the rapid rate prices have risen in 2021, it is understandable agents would adopt this approach.
Accurate market pricing – every endeavour has been made to establish and then price at the current market value. There is no element of trickery in the price the agent and the vendor put forward to the market. Because the housing market has been rising so quickly in 2021, properties have still been exceeding the agent’s well intentioned accurate price guide.
One of the great errors that a buyer can ever make is to submit an offer solely based on the agent’s price guide.
Or to assume the selling price of the property will be even loosely related to the guide provided by the agent.
These are the unfortunate facts yet confronting reality about buying in the current Sydney real estate market.
Buyers who have inadvertently become conditioned to underquoting can then fall into the trap of adding 30% to 40% to every agent’s price guide. In the process, they may be unintentionally ruling themselves out of the running for homes that are priced accurately and within their budget.
The frustration doubles when a suitable property sells within your price guide that you did not even bid on, due to thinking it was going to sell “way over”. In the current market, it is highly advisable to research the property value independently of the advertised guide.
Attend inspections and auctions of every home in the immediate area that you intend on purchasing. Become an expert on the market then form a clear view of what your target property is worth and what you are prepared to pay for it.
There is nothing wrong with assessing the value of your dream home and being prepared to pay over the odds to secure it. Not a great strategy for investors though. Slightly overpaying to secure your dream home is fine. Being misled week in week out by agents who are simply lying to your face is simply demoralising though.
The price guide is often no guide at all!! If selling, choose an agent who quotes an accurate market price. It will go a long way to attracting the right buyers to your home.