Shannon Davis has just returned from the UK and reflects on how differently real estate transactions are conducted there and what opportunities exist for investors.

Our finance expert, Andrew Mirams, has been looking into the impact of the new APRA rules on investors and we ask Andrew if APRA’s grip on the banks is too tight.

Michael Yardney looks at why agents underquote property prices and how to beat them at their own game.

Jane Slack-Smith shares the 6 things she has found successful investors do and in a two part interview we catch up with the author of a report on what you really think about agents.

 
Transcripts:
Michael Yardney
Kevin:  My chat this week with Michael Yardney will apply to buyers in every market except Queensland, and why? That will become obvious to you in just a moment.

Hi, Michael.

Michael:  Hello, Kevin.

Kevin:  Michael, the topic for this week is about underquoting on property prices. Particularly this relates to auction, Michael.

Michael:  Kevin, I’ve been to a lot of auctions where the properties have sold for hundreds of thousands of dollars more than the agents have quoted, and I know that’s certainly disappointed many perspective buyers who’ve missed out at auction, sometimes being misled by the agent’s quoting range.

Kevin:  It's difficult – isn't it – because agents are not valuers, yet they’re expected by buyers to give them an indication – probably fairly so, too – about where the bidding will start or where it might finish.

Michael:  That’s true. I think we should, first of all, say that most agents are not being dishonest. There are two elements to it. Definitely, there are some people who do try to lure a large crowd to the auction by quoting on the low end of the range. But it's important to draw the distinction between underquoting and the situation where competitive bidding results in a sale price way above what the vendors reserve was. Boy, have I seen a lot of those, as well.

Kevin:  Yes. That use to be a saying, “Feed the greed.” Get the buyers there, give them a low indication. All we want to do is just get the buyers there.

Michael:  “Quote it low, watch it go. Quote it high, watch it die.”

Kevin:  That’s exactly right. Those sorts of things are fairly well embedded in the industry. But I think the culture nowadays, Michael, is that agents are a lot more understanding that they have to be very transparent.

Michael:  Kevin, it’s illegal to underquote. But let’s remember that the auction process is designed to extract the maximum price for a property by bringing together a group of potential purchasers in a competitive environment. I’m still regularly surprised how high an emotional buyer will push prices just in their eagerness to get it. I genuinely believe an auction is a good way to sell many properties.

Kevin:  I said at the opening that it would apply to a buyer in every state except Queensland. The reason being is that in Queensland, the agents simply cannot quote a figure; they can only give competitive market analysis, which is an indication of what is sold in the area, which seems to me, Michael, to be abundantly a much fairer situation.

Michael:  I agree with you, Kevin. I agree. But the system happens here. There’s an owner who’s thinking of selling a property, so he asks a number of agents to tell him what they think his property is worth. Of course, the vendor is inclined to go with the agent who gives them the highest price, who quotes them the highest price.

That’s not necessarily the right way to do things. But I know some agents are a little bit generous in this appraisal. They quote a highish price, but during the marketing campaign, they put a lower price bracket there, hoping – over time – to get the eventual selling price close to what the vendor hopes for.

Unfortunately, the estate agent is in a difficult position. He’s a broker between the vendor, who naturally wants a top p