Whenever we ask prospective property buyers what they would rank as the most frustrating aspect of the buying process invariably the answer is the agent “lowballing” the price guide. In our day-to-day role as buyers agents we regularly see selling agents give would-be buyers enticingly low price guides so as to bolster their auction attendance numbers. Time and again we watch disappointed registered bidders walk out of auction rooms without even having had a chance to bid after having watched opening bids knock them straight out of contention.

Knowing the financial and emotional cost that goes into preparation for auction day, it’s no wonder that buyers are increasingly fed up with the vagaries of agent price quoting.

In August 2013 Intelligent Property Services (IPS) reported that there was a relatively significant variance of 13.18% between real estate agent price guides and the final auction result in Sydney. This sample selection was across 39 auctions ranging from Sydney’s east to inner west, with a few sales on the lower north shore.

In a rising market – especially one as competitive as the inner ring suburbs of Sydney – this was largely unsurprising. So far this year we have seen the trend continue in our key target areas, which span from Bondi in the east to Burwood in the west.

After monitoring a large range of auctions we can report that a similar trend continues, however the variance is slightly lower than this time last year. With a data set spanning auctions from $549,000 – $1,700,000 we recorded an average variance of 12.78%. Amongst the range of variances recorded we noted one agent who price guide relative to the end result was slightly above (1.5%) and only one agent (from our sample of 30 auctions) whose price guide reflected the actual sales price. The largest variance was 26%, recorded for a $1.362m terrace in Alexandria’s exclusive ‘golden triangle’, which had an initial guide of $1.0m+.

With the Sydney market getting off to a cracking start in 2014 we saw that agents and vendors’ price expectations were being eclipsed as the sale at 24 London Street, Enmore demonstrates. With a price guide of $600,000+ and an auction result of $780,000 we can see the initial guide was 23% under the sales price. We believe that price guides need to be more accurate, especially given the information available to agents and the large sums of money involved in property transactions. Not only do real estate agents have a plethora of information available to them when they price each property, they are also supposed experts in their local area.

Whilst our intention is not to infer that all properties are deliberately underquoted, nonetheless the impact remains the same; some sales are pushed significantly over expectations by exuberant bidders as evidenced by the oversized studio at 12/7 Ithaca Road, Elizabeth Bay  selling for $725,000 (which was a whopping $165,000 over reserve) and 24% above the original guide of $550,000.

Another recent example was at the sale of 72 Ivy Street, Darlington. With a price guide of $700,000+ there was approximately 100 people in attendance at the auction. After a slow auction bidding stalled in the $700,000’s and a vendor bid of $810,000 was used by the frustrated auctioneer; perplexing many in the crowd. The dilapidated terrace then passed in at $811,000 and finally sold after negotiation for $820,000 – some $120,000 over the price guide.

With the traditional Spring selling season fast approaching, what better time for the industry to show greater levels of transparency in order to temper buyer frustration and to give them a better chance in picking the proverbial battles that they actually have a shot at winning.

IPS will continue to monitor the market and track the results as they occur… Interesting times.

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