Agents At It Again

From the Herald Sun.

Estate agents baiting buyers
By Adam Harvey and Amanda Phelan
10nov02

REAL estate agents have been accused of "a major consumer scandal" by misleading home buyers about the prices sought for properties at auction.

An investigation by The Sunday Telegraph has revealed the practice of agents underquoting prices is widespread across Sydney.
Consumer groups and some real-estate experts say underquoting prices expected at auction is wasting consumers' time and money.

Many buyers shuffle their schedules, based on advice from agents, to view properties they have no realistic chance of owning, The Sunday Telegraph found.

They also often pay more than $400 for a building inspection, and hundreds of dollars in legal fees, searches and strata reports.

In the frenzied, inner-Sydney market, agents commonly provide "guide prices" at least 20 per cent lower than the auction sale price or reserve.

In some cases, the agent's estimate is 40 per cent below the reserve price on the property.

In real-estate jargon, the practice of deliberately underestimating sale prices is called "bait and crunch".

Some agents aim to attract desperate home-hunters by giving them a lower guide price, then pressure them into bidding higher at auction – often way beyond what they can afford.

Real-estate agent and author Neil Jenman said deliberate underquoting was a huge scandal.

"It's the greatest hidden consumer scandal in this country," he said.

"It can be emotionally and financially devastating. Agents have a saying, 'Quote 'em low and watch 'em go'. It's despicable."

The Sunday Telegraph asked for guide prices for more than 40 houses and units up for auction, then compared them with the sale price or reserve. Almost all were underquoted.

One Bondi unit was flagged to potential buyers as being "in the mid to low $300,000 range". It sold for $550,000.

A house at Milsons Point was quoted to sell at $900,000, but was passed in at auction at $1.175 million.

Another house, at Sylvania, with a guide of "over $1 million" was passed in at $1.4 million, while a property at Erskineville, with a guide of $400,000 to $410,000, sold for $491,000.

A one-bedroom unit at Bondi was estimated at $350,000 to $450,000 but sold for $515,000.

Eastern suburbs builder Ben Wyborn was given an estimate of $340,000 for a two-bedroom apartment in Glenayr Avenue, Bondi. The property sold at auction for $420,000.

"These guys know the market really well," Mr Wyborn told The Sunday Telegraph.

"They know what people are going to pay. I guess it's good for them in front of the owners if they get a stack of people turning up to the auction."

One young couple, Nick and Katie, from Darling Point, last Wednesday night missed out on a Rose Bay semi which they said an agent from Ray White Double Bay had told them would sell for above $650,000. It was passed in at auction for $735,000.

It was the fourth time the pair had missed out at auction after paying for building inspections.

"We spent a fair bit of time doing research and a fair bit of effort," Nick said.

"They know what the reserve's going to be – and they waste everybody's time by giving misleading quotes."

Fair Trading Minister John Aquilina said the practice of underquoting would become illegal under new laws next year.

Although penalties are to be determined, Mr Aquilina said the ability to prosecute would be a deterrent.

"Buying or selling a house is probably the biggest business deal many couples or individuals make in their lives," he said.

"It can be devastating when a potential buyer is led to believe a property is in a certain price range, only to find it sells for hundreds of thousands of dollars above that."

The Real Estate Institute of NSW said it believed the practice was not widespread, but damaged the reputation of all agents.

"First-home buyers are going to believe what they've been told by a real-estate agent," institute spokeswoman Christine Castle said.

"If that advice is misleading, for whatever reason, then that is sad.

"It's disappointing to us when people, probably with the best intentions to create interest for a property, have made mistakes by misquoting or under-estimating. The consequences can be huge – but buyers need to do their homework and check past prices in the area."

Peta Donald, of Bondi, who has been looking for a flat since March, said she was heartbroken by what agents had told her.

"My first experience was with a place at Clovelly," Ms Donald said.

"I was told it would go for mid-$300,000s, and I got a rude shock when it sold for $480,000.

"If agents could just be a bit more honest, it would be a big help."