3 Cheers for Daniel Andrews and Consumer Affairs Victoria!

Welcome to Part 1, of the James Big 3 Reports on the changes in the $2M+ market. In Part 1, we discuss the first change, under quoting.

Parts 2 and 3 will be published in the coming weeks.

On May 1st 2017, we will hopefully be entering a new era; one that will make our markets a lot different from what we see today.

The Andrews government, the CAV and are making a sincere effort, to try to remove or dramatically reduce fraudulent AGENT UNDERQUOTING.

Underquoting Is and Underquoting Is Not:

Underquoting Is an agent saying $3,000,000 when the seller wants $3,500,000.

Underquoting Is Not when the agent thinks it’s worth and says it’s $3,000,000 – it’s “on the market” at auction at $3,000,000 and it sells for $3,500,000 – that’s not underquoting – that is the vagary of the market AND probably very good agent work.

Underquoting in April 2017, is still generally part of the agent mindset and is still endemic, just a few short weeks before the May 1st 2017 start date for new legislation.

VESTA

However we have confidence that Underquoting will be dramatically reduced, because Consumer Affairs Victoria is following the formula that worked in largely stamping out auction dummy bidding in 2005;

  1. A clear and logical plan that states WHAT is expected and acceptable.
  2. CAV and the REIV have communicated that plan to the industry and set a timetable.
  3. CAV has brought out the big stick and started making some examples in court. It’s unfortunate that some nice people have been hit and what they may have been doing was no different to what almost everybody else was doing, but………..

OS&I

Historically – how did Underquoting begin?

What started off as a “smart marketing ploy” all those years ago as bait or underquoting – where an agent would tell you the buyer, that the home will sell for $2,000,000, when he knows the seller wants $3,000,000 and another buyer has expressed interest at $2,750,000 and the agent himself thinks it’s worth more than $2,500,000 – what started as a “good marketing idea” turned into an unofficial INDUSTRY STANDARD – as competing selling agents who were quoting ethically, down the road on a similar home, noticed that underquoting was working and they were losing buyers – and they for survival reasons, started to do the same (UNDERQUOTE).

Buyers felt cheated, especially when they had passed on buying another house believing they could afford this, especially when they spent money on pest and building inspections, and especially when they felt a level of trust with the selling agent.

That was the start of the downwards ethical spiral, something that has caused angst on all sides (yes even with some selling agents).

Why stop it, if it works for some sellers?

Because it’s fraud. Theft and extortion also work in getting more money – but they are illegal, they are wrong and they weaken our society.

Craig and Ali

What exactly is happening May 1st 2017?

Selling agents will be restricted to quoting prices in a very specific manner and they will have to provide a specific supporting data sheet.

Official Definition of Underquoting (CAV)

Underquoting can occur when a is advertised at a price that is less than the estimated selling price, the seller’s asking price, or at a price already rejected by the seller.

So it is clear – if an agent tells you a figure that is a bait price, below what is expected by seller, agent or another buyer who offered, then it is underquoting.

The Consumer Affairs Website (CAV) website on UNDERQUOTING is concise and really well done.

Click below for CAV website on underquoting and pricing.

CVA

Today, right now, just a few days before the May 1st 2017 start date of new legislation, our industry is actually nervous.

Agents/Advocates can see:

  1. Successful prosecutions and that really, really worries all of us.
  2. A real community pressure for change and there is a real desire amongst most agents to change – so as they can feel part of a legitimate industry – not a shonky one.
  3. Many competing selling agents are getting ready to quote legally on May 1st and agents always worry about what other competing agents are doing.

So, we are hopefully in a transition phase to a more open and honest means of communication of seller and agent price expectations.

With all major transitions it will be a bumpy road for a while.

The line in the sand is May 1st 2017

Footnote 1: The sky never fell in after Dummy Bidding was banned 2005 and it will not fall in if Underquoting is largely stopped in 2017.

Footnote 2: This is not exclusively a selling agent thing – buyer agents and advocates, vendor advocates, valuers and ancillary support staff and contractors – such as lawyers, professional bodies (REIV) and Sellers – all should soon understand that if they are involved in accepting a deliberately misrepresented or underquoted price, then they may be regarded as complicit in an underquoting fraud by accepting such.

Footnote 3: There still seems to be some clarification required from the CAV, as to what constitutes a rejected offer from a buyer that would force a change in the agent quote. An unconditional offer from a buyer on a contract is clear – but a casual comment or unsolicited text is open to abuse and in some circumstances it does not constitute a real offer.

We believe the CAV will clarify this and again we support CAV’s actions to date – they have not been looking to prosecute “one-offs” – they have been looking to prosecute where they believe there is a clear and substantial underquoting trend.

CASH

So whilst Consumer Affairs wields their big stick, we at James Buyer Advocates want to be positive about agents and the changes.

POSITIVE and SUPPORT Agents and Improved Quoting with 10 x $500 cash prizes AND publicity to selling agents who do the right thing.

We are looking to find selling agents who have:

  1. Quoted ethically/legally by providing the indicative selling price (not below their thoughts on , another buyer’s written unconditional offer and/or the seller’s reserve).
  2. Quoted ethically/legally with 3 “real” comparables and the suburb’s and …… as required CAV taskforce / legislation.
  3. The home was “on the market” and/or sold within or very close to the 10% quoted range.

So please send to mal@james.net.au examples of good agent quoting and we will publicise the selling agent on James Market News (10,000+ readers) and give the agents a $500 cash prize.

Conditions – Award 10 cash prizes of $500 each to legally/ethically quoting selling agents.

  1. We will advertise the agent and property in James Market News one week.
  2. We will wait until Wednesday for any email submissions from the public.
  3. We will award the cash prize to the agent with a photo the following week if all OK.
  4. We are looking at agents in the , , and area where the underquoting issues have been the most substantial.
  5. Quoting on homes over 2 .

Quoting ethically to buyers and acting in the best interests of a seller are NOT incongruent, IF there is an industry wide commitment to do it.

Let’s hope we can give those cash prizes out – we are regularly told by all agents that they need the money.

Change1

1. Transition Difficulties: Initially during the transition period there could be confusion amongst buyers, as they will hear changes in how agents are quoting to them and extra words added on like, “this is the real figure, you don’t have to add 20% onto it”.

Until the market physically witnesses that the agent quotes and results are aligning a lot better, there is a chance of greater unhappiness amongst buyers, as they have even greater uncertainty – do they add 20% or not!

Hang in there buyers please – good things take time.

If there is to be real change.

  • it will happen with agents immediately in May,
  • will be evident in results in June and
  • hopefully believed by all in the market (if the selling agents actually do it) by Spring 2017.

2. The selling agent is NOT WORKING for you the buyer first: Under legislation, the agent’s obligation is to the seller first. So please remember the agent quoting needs to be legal – after that, it does not have to be helping you the buyer more so than their obligations to the seller.

You as buyer, will still need to do your own due diligence, in relation to your own needs on many things including PRICE and VALUE.

There will be more opportunities for smart buyers, as the new quoting regime settles – as not everything will be add 20% – some will be add 20% and others will be subtract 10%.

3. Final Word: Buyers, we suggest you continue to focus on your main goal – getting what you really, really want.

Don’t get caught up in the Underquoting Saga – we don’t – we’ve still been involved in 3 off-market negotiations this week.

Playing devil’s advocate, we as buyers are not perfect and mistake free AND the government hasn’t legislated against buyers UNDERQUOTING to the selling agents, what we are prepared to pay. Our point being:

Crucify and prosecute the fraudulent serial underquoters after May 1st 2017 –  but allow some leeway, cut a little slack; for those selling agents who are trying to do the right thing, whilst still representing the best interests of their client – the seller, not you the buyer.

Stay Tuned for Part 2 on the Market’s Big Changes after Easter at James Market News.


Tags: , , , , , , , , , ,

Be with James

Would you like to talk to us about finding or negotiating on your next home?
We buy 100 homes for our clients every year.
We buy Inner East and Bayside over $1m.

Inside James Market News