oc | Wednesday 26th February

Step (Under/Over + Skilled) Quoting – Black or Noble Art?

First Published September 2011 – republished September 2012, and again May 2014: Agent Step Quoting is a contentious part of our industry: It’s how selling agents nudge buyers up the staircase towards a price their clients are hoping for. Done badly it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.

We usually only hear of Step Quoting when it’s done badly as it highlights the low skilled, unethical agents almost immediately. When highly skilled agents use step quoting successfully it goes unnoticed except through careful examination at a later date. Yet within the Inner East and Bayside $M+ Markets it is a particularly common practiced black or noble art depending on your point of view.

How does it work? Well at the top of the stairs in Step Quoting you have a seller, a mum or dad just like you and they think their home is worth $4 million. At the bottom of the stairs in step quoting is you, the buyer and you think the home is worth early three’s, but your dream price is $2,950,000 – you don’t want to admit to a 3 in front of it at this stage.

Both you and the seller are interested in the transaction because the seller feels it’s time to move on and you hoping it’s time to move in.

You’ve seen the home in The and you’ve rolled up to the first open for inspection. The selling agent at the door says $3,200,000+ when you ask the “how much” question, while not in any way looking interested under your recently purchased “anti-agent” dark sunglasses.

“Mmmmm $3,200,000 – a bit more than the $2,950,000” you thought it was worth and maybe you will have to concede it’s going to have a 3 in front of it. You’ve moved a step to Step Two – not that painful.

But hold on, wasn’t that $3.2 million quote underquoting by the agent? Hasn’t the agent committed an offence by quoting at this stage a price much lower than they said the may sell for?

Let’s press rewind for a minute.

OK Mal, how can the owner realistically think the home is worth $4,000,000? Trust me, this for many is not a dream figure, this is a cast in stone, almost religious belief and it comes from one of four sources: the agent told them, their mate told them, another agent told them or the tea-leaves told them – but they believe right now their home is worth $4,000,000 when quite possibly in this falling market the home is considered low $3m’s by most serious buyers and even the agent currently trying to sell the home.

How come? Time lag and the well known leap of faith valuing technique. 10 weeks ago the owner met with a number of agents – some competent, some not so competent and some downright rascals and the average of what the seller was told seemed to be $3,400,000 to on a really good day $3,700,000. One rascal agent did say $4,300,000 but the two other competent agents said mid $3,000,000’s. With each of the two “mid $3m’s quote” competent agents the seller asked “do you think I can get more, could I get $4,000,000” Each agent, who still wanted to get the job replied “it’s possible but unlikely”. Luckily for the seller one of the competent agents was engaged, even though they were not the highest in estimate.

That was 10 weeks ago, this is now.

The vendor, who is now getting more emotional, is convinced more than ever that the news of the world doesn’t apply to him – when in fact it does and his $4,000,000 was always $3,700,000 on a good day – yet the market has dropped 10% in 10 weeks and his home is now worth $3,400,000 – on a good day with plenty of bidders. The selling agent doesn’t know yet if the home will have plenty of bidders as this is the first open for inspection and so being professional and with an obligation to the seller’s interest first and foremost they are quoting $3,200,000 plus. You tell me – are they dealing morally, legally or ethically?

The first open actually went pretty well and the selling agent put 7 names onto their list. As one of my favourite agents and master of the Step Quote once explained there are 3 lists: the door list (everybody who goes through is on that), then there is the engaged list and finally there is the buyers list.

But that’s another story, back to the steps and Step Quoting. It’s Week two and you notice in the papers the home is quoted at $3,400,000+. “Mmmm you think they must have interest”. Well they may and quite possibly they may not. Think about it – the $3,400,000+ quote would have gone in before the first open to meet printing deadlines, the new quote is not a response to the first Open For Inspection(OFI) but part of a well planned Step Quoting process.

You are back at the second OFI and you ask about the quote – of course in a manner behind your “anti-agent” dark sunglasses so as the agent knows you’re not interested. A reply comes either “that was a printing mistake” (one of my favourites if the campaign hasn’t leaped out of the blocks in the first week) or “yes we’ve had a lot or interest and so we put the quote up”.

At this point a number of things have happened – you the buyer have made it onto the second list – the engaged list – as you are a “repeat inspector”. Second time round you really like this home and you, the buyer, have now gone to Step 4 begrudgingly. Step 1 was your dream price $2,950,000 and you blew past Step 2 ($3,000,000) and Step 3($3,200,000) and your teetering around Step 4 ($3,400,000).

Meanwhile back at the ranch the selling agent is also doing all they can to pull the vendor back down from their top step of $4 million – talking about , and falling prices and global recessions. The vendor won’t budge. “You said I could get $4million,” they say.

Week 3 and you are back at another open for inspection – you are now being considered a serious prospect. But the price has gone up again: “We have had some interest at around $3.7 million. How do you feel about that? “ the agent asks you.

Actually you feel sick, but behind your special “anti-agent” sunglasses you trot out “Mmmm  guess that puts me out” $3,700,000 – you think – OMG. What – I’m not paying over $3,600,000 and so welcome you’ve arrived at Step 5 in the Step Quoting process.

The agent has deliberately not asked the vendor for a reserve as he/she is aware of what they “may” want and also aware of the law. Meanwhile the agent is pummelling the seller with reports of how the serious buyers have either fainted or been abusive when they hinted at a price of $3.5 to $3.6 million.

So come auction day; you the buyer are at Step 5 with a lean and our vendor is at Step 7 with a lean.

The home is naturally passed-in and the selling agent runs up and down the stairs until a result either happens or the vendor sticks to their guns, and the home is listed for private sale the following week.

So, has the agent acted unethically or illegally?

They would have if they had told the seller that they could get “$4 million, no worries, I promise, maybe even $5 million”, and then once they had “bought the job” given the buyers a quote of $3 million at every open for inspection and never made any effort to work (explain to) the buyer or the seller along the steps.

Such agents are unethical and lazy and unfortunately they are too plentiful in through deliberate training or poor supervision.

But are agents who work to bring the buyer up to maximise the vendor’s price, and the vendor down towards what the market will pay, which ultimately achieves what the vendor wants (a sale), doing their job ethically and professionally? In these cases it’s a fine line, but if you are a buyer that moves up the steps and you have been informed along the way then well………… are these quality agents not just doing their job very well?

Why you as a buyer may need some professional help? In this market what happens if you are the only buyer on the engaged and buyers list since the first quote of $3,200,000+?

You mightn’t like being run up the Step Quoting stair, but that’s how the property market works, and the highly skilled selling agent’s job is to get the best price for their client, which by the way is not you.

Subscribe to our Market News Newsletter


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 $2m.
View more MasterClass Articles

Inside James Market News