Property boom: cheeky way real estate agents pressure buyers to spend more and how to spot a genuine deal By Aidan Devine
Keeping below budget has become difficult for home buyers, with buyer’s advocates revealing a ploy agents are using to push up prices and how to spot a genuine deal.
Knowing if a property is actually within your budget has become tricky in the current market due to a mix of cunning agent tactics and rising prices.
Many properties are being listed without price guides, while those with a guide often sell for well above the quoted figure. It has left home seekers a conundrum: how do you know what a property is really worth and how can you avoid competing for homes where you stand little chance of becoming the new owner?
Real Estate Buyers Agents Association president Cate Bakos said there was no “magic formula” to help purchasers address the issue.
The only solution was doing plenty of research, she said. “You must do your homework … Most people research their holidays more than properties,” she said.
Being able to analyse sales meant understanding some key concepts, she said.
HOW PRICE GUIDES ARE SET
Home seekers should view price guides with a heavy grain of salt, Ms Bakos said.
The primary reason was that the current boom market made it difficult for agents to determine true “market value”.
New price precedents have been set every weekend and agents have reached the point where they cannot always predict what the market will be willing to pay.
This has been especially true during lockdown, when listing volumes in many suburbs have plummeted to record lows, while buyer demand has remained elevated.
University of Adelaide property program director Peter Koulizos said buyers were doing things “they wouldn’t normally do” to secure properties and this was adding a layer of volatility to sales.
“There is such a shortage of supply, we have buyers who are getting very frustrated after missing out on property after property,” Mr Koulizos said. “They reach a point where they will basically pay whatever they can.”
THE PROBLEM WITH GUIDES
most sales offices tend to set price guides for auction listings well below the expected sale price, Mr Koulizos said.
Agents usually lowered their guides in an effort to, ironically, get the home to sell for a higher price, he added.
“It’s economics 101,” he said. “The lower they quote, the more buyers they will attract to the property. And when demand goes up, the price goes up.”
Agents used the strategy in the hope buyers would visit the property and form an emotional connection.
“If they fall in love with the property they will find it hard to let go,” Mr Koulizos said. “They will move heaven and earth to be able to afford the property. They will go to the bank of mum and dad, they will try to get a better loan rate or any of the other ways to get extra money.”
WHAT AGENTS HAVE TO DO
Laws in most states prohibit agents from setting price guides too low.
The requirement in most jurisdictions is for agents to provide a guide within 10 per cent of the amount the vendors want. An agent who quotes a price below this range is “underquoting”, which is illegal.
Buyer’s agent and director of Aus Property Professionals Lloyd Edge said agents tended to set their guides at the lowest figure legally possible under the legislation.
This could still allow for a large gap between the quoted price and the vendor’s expectations – especially in pricier suburbs. Ten per cent of $2 million, for example, could mean a difference of $200,000.
Mr Edge said the rising market also meant the price vendors were willing to accept, which formed the basis for the guide, was often well below the eventual sales price.
The result was that price guides could be skewered at two levels: first by being based on an inaccurate or outdated valuation, and then being quoted at a range lower than that figure.
HOW TO MEASURE VALUE
Mr Edge said buyers should rely on comparable sales instead of price guides and expect to add a premium on top of recent sales.
“You can’t rely on sales from six to 12 months ago. You need to look at what has sold a week and two weeks ago because the prices are going up all the time,” he said.
Mr Edge recommended buyers phone multiple agents, not just those on the listings they like, to get a sense of what they will need to spend. “Agents will usually show you comparable sales, including what sold last week.”
The tricky part of using recent sales to determine price was knowing which properties were actually comparable, Ms Bakos said.
For a comparable sale to be a reliable indicator of price, it needed to be a similar land size, condition and location, she said.
“We know the market is moving upwards so you can’t secure something at last month’s price. You need to keep track of how much the market is rising. At the moment, it’s a bit over one per cent a month, but if the property is a real crowd pleaser it will probably be more.”
WHEN TO WALK AWAY
Ms Bakos said being prepared to pay above comparable sales was not the same as paying “any price”.
“There comes a point where it’s no longer based on comparables, it’s based on emotions. If you feel you’re up against someone who is very emotionally attached to the property, who is prepared to pay something so far above recent sales, it may be best to simply walk away,” she said. “If you are bidding against irrational people at auction, you actually don’t want to win.”
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