Underquoting… And What It Actually Means.

Melbournians love to throw this word around! Anything that sells over the top end of the quoted range is often considered to have been ‘underquoted’.. But it’s not quite the right use for the term. 

Let's start with the technical definition of ‘Underquoting’ (from Consumer Affairs Victoria) - Underquoting can occur when a property is advertised at a price that:

• - is less than the estimated selling price

• - is less than the seller's asking price

• - has already been rejected by the seller.

Whilst underquoting ran rampant just a few years ago, the introduction of the Statement of Information (aka SOI), and a few carefully placed fines handed out to key agencies, agents have become much more cautious in how they decide to toe the line when it comes to quote ranges. 

Low quotes were typically used as a marketing tactic to entice more buyers to the property, resulting in more competition, and ultimately a strong result for the vendor. Another convenient bi-product was the fact agents could boast they sold X hundreds of thousands over the top end of the quote range, when really the value of the property and vendors reserve was hundreds of thousands over the top end to start with! So really the property sold where it should have, and in line with vendor expectations. 

Alternatively, if a property is quoted $1-1.1m based on the agents valuation, and is called ‘on the market’ within or at the top end of that quote range (meaning it has also reached the vendors reserve price), but competition from buyers drives the price to $1.25m, this property has not been underquoted. Despite the fact a buyer may see the result and automatically assume the property was ‘underquoted’ because it sold for $150,000 above the top end of the quote. 

Oftentimes in these circumstances, where the vendors expectations are extremely reasonable, the vendor has either held the property for a long time and has no concept of the market value, or perhaps they genuinely want to get it sold and over with. This coupled with an out of area agent who isn’t across property values in the same way a local agent is can result in what could be perceived as an underquoted property. 

Whatever the agent and vendor decide and agree to quote the property, they need to justify this quote range with recently sold comparable properties on the statement of information. This is where you as the buyer are able to discern the true value of the home. Look into the recent sales listed and work out for yourself whether you think they are truly comparable. They will often lead you to know if the property has been quoted shall we say… conservatively. 

So when you see a sale price well over the top end of a quote range.. It may not necessarily have been ‘underquoted’. It may have been your fellow competition who drove it to sell to inflated levels!

Remember, real estate is not an exact science. We are dealing with human beings and their emotions, which can get extremely heightened when it comes to buying and selling property. So despite all the research and drilling into comparable sales and grilling the agent and guessing the vendors motives, some sale prices are just… huge. 

If you need a hand navigating quote ranges… you know who to call!