Although it is making headlines in NSW and Victoria due to their overheated markets, underquoting on price is just as prevalent in Western Australia according to RE/MAX WA managing director, Geoff Baldwin.
“Although the NSW Government has now tightened its guidelines around pricing with particular focus on underquoting the practice has been a potential breach of federal trades practices for many years, he said.
“Underquoting is considered to be in play when a property is advertised at a price below its true value and at a level the seller is not genuinely willing to accept thereby giving potential buyers a false impression.
“Underquoting usually comes in the form of “From” or “Offers Over” with an advertised price well below the expected eventual sale price of the property.
“Although underquoting should not be condoned there are several issues that need to be considered when applying a pricing strategy that effect buyer and seller.
“It is a fact that most buyers actually pay considerably more than the amount the initially budget because they start out with an expectation they will get more for their money and it’s not until they are exposed to the market that they become more attuned to what they will actually need to pay to meet their needs.
“On the other hand, sellers who adopt a fixed price method of selling inevitably tend to overprice through fear of underselling and with the thinking that that people can always make offers.
“The folly of conventional fixed price selling is that the right buyers coming together with the right sellers is extremely hindered resulting in buyers often missing out on including properties that are overpriced and potentially missing out on seeing their dream home and sellers staling their listing to the market through over exposure to the wrong buyer pool.
“The fairest way to price a property is to use market evidence to establish a likely selling price but then to place the property in a “Buyer Feedback Range” say 8 to 10 percent below and above allowing the buyers to provide their opinions and to negotiate within that range once sufficient feedback has been received.
“Contrary to popular opinion, buyers won’t adopt the bottom of the range but will more often make a comparison with what they have seen and then offer a fair price within the range based on how much they like the property.
“The Buyer Feedback Range method of pricing has proven to be extremely successful for both buyers and sellers however should only be used by agents who have undergone training and are using the correct documentation”, Mr Baldwin said.