Underquoting Problem? NO! It's A Stupidity Problem!

Published 29 March 10 10:20 AM | Peter Mericka 

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

 

When stupidity reaches the front page of The Age newspaper, something has to be said.  Today’s Age screams, “Push to end underquoting” (The Age, Monday 29 March, 2010 p.1).  Unfortunately, the author, Property Editor Marika Dobbin, appears to have ignored the real problem and has just followed the parade of misinformed real estate industry commentators.  Let me confirm, the real estate industry in Victoria does NOT have an underquoting problem – it has a stupidity problem!

 

Here are the reasons why I say the real estate industry has a stupidity problem, rather than an underquoting problem:

 

1.       A real estate agent is permitted to offer property valuations after completing a few weeks of night school at a TAFE college.

 

That’s STUPID!

 

2.       A property valuer must complete a full tertiary degree course, followed by industry induction training before being permitted to prepare valuations, and yet they are not promoted by Consumer Affairs Victoria, the REIV or the media as the experts in providing property value information.

 

That’s STUPID!

 

3.       Real estate agents are not permitted to call their “valuations” valuations, because they are not qualified to value real estate.  However, they if they call their valuations “appraisals” they can get away with it.

 

That’s STUPID!

 

4.       In a knee-jerk reaction to underquoting, the government required the untrained, unqualified real estate agent to provide a valuation on a vendor’s property, regardless of the real estate agent’s experience or lack of experience in valuing real estate. (See Section 47A of the Estate Agents Act 1980.)

 

That’s STUPID!

 

5.       The REIV trains real estate agents, but it includes nothing in its training about valuing real estate.  The REIV knows that professional valuers are able to assist consumers to determine property values, but it deliberately fails to inform consumers of this option. (See “Enzo Raimondo – Valuation Misinformation From REIV”.)

 

That’s STUPID!

 

6.       Consumer Affairs Victoria falsely tells vendors that they must use a licensed real estate agent to sell real estate, and they “should…use the agent’s estimated selling price as a guide”.  The suggestion that a vendor should “consider paying for a valuation by an independent sworn valuer” is presented merely as an option.  (See “Real Estate – A guide for buyers and sellers” at page 35.)

 

That’s STUPID!

 

7.       Chris Warren is one of a small number of real estate agents who have struggled to provide ethical leadership on the issue of estate agents valuing real estate (see “The Pricing Dilemma – An Agent’s View” ), but the real estate industry, real estate industry regulators, and real estate industry commentators, have ignored him.

 

That’s STUPID!

 

8.       Purchasers have been encouraged by the real estate industry, Consumer Affairs, and industry commentators to rely on estate agent valuations instead of their own Due Diligence.

 

That’s STUPID!

 

9.       Government and Consumer Affairs Victoria listen to consumers who complain about valuations provided by untrained, unskilled and unqualified estate agents, without having done their own Due Diligence, and declare that the untrained, unskilled and unqualified real estate agents are bad because their valuations are unreliable.

 

That’s STUPID!

 

10.       I submitted a paper to the Estate Agents Council, which explained the problem of underquoting in terms of its link with real estate agent “appraisals”.  They avoided all of the issues raised and ignored the recommendations made. (See “Modernising The Estate Agents Act 1980 - Submission to the Estate Agents Council”.)

 

That’s STUPID!

 

11.   I forwarded a copy of this submission to the Minister for Consumer Affairs, and it was ignored.

 

That’s STUPID!

 

12.   I forwarded a copy of this submission to The Age Property Editor, Marika Dobbin.  She wrote her article without making reference to the issues raised in my submission.

 

That’s STUPID!

 

I'm sure that if we can solve the real estate industry's stupidity problem, the associated problems will disappear.

Filed under: Valuation, Consumer Affairs, underquoting, valuer, appraisal, Minister For Consumer Affairs, estate agents council

Comments

# Twitter Trackbacks for Australian Real Estate Blog : Underquoting Problem? NO! It's A Stupidity Problem! [reic.com.au] on Topsy.com said on March 29, 2010 5:26 PM:

PingBack from http://topsy.com/trackback?url=http://reic.com.au/blogs/australian_real_estate_blog/archive/2010/03/29/underquoting-problem-no-it-s-a-stupidity-problem.aspx

# Chris Warren said on March 30, 2010 9:54 AM:

Hi Peter,

Great article and needless to say I totally endorse what you say. Consumers need to know and be educated that an agent's role is to market their property, get offers and negotiate the best possible price for them- not to price their property! The cost involved in getting an independent valuation first is nothing compared to the final outcome.

Regards

Chris Warren

# George Rousos said on March 30, 2010 4:08 PM:

Hi Peter,

I have been liasing with the landtitles office on the possibility of independant valuations becoming mandatory as a duty of disclosure on all contracts for sale of land in NSW.

They are finally listening and amongst other amended provisions being considered under the conveyancers act, all correspondence to this date has been very positive.

cheers

# Peter Mericka said on March 30, 2010 4:14 PM:

Hi George,

Well done.  Be sure to send them a copy of my submission (the hyperlink is in the body of the posting above) and see if they can follow the logic better than Consumer Affairs Victoria managed to do.

# George Rousos said on March 31, 2010 10:08 AM:

Matt Brown MP: is a member of parliament  overseeing the review on Vendor Disclosure in NSW

http://www.nswalp.com/labor-people/5/10/matt-brown-mp

# Peter Mericka said on March 31, 2010 10:57 AM:

I hope Matt Brown MP is aware that he can solve one of the greatest problems in the real estate industry if he can stop real estate agents from offering "free appraisals".

# Duetto said on April 2, 2010 5:13 PM:

i went to look at a property last week, it was advertised $700-750,000, i made an offer of $730,000, didnt get accepted so i offered $770,000, which was ove the range. the agent told me the owner wanted $780,000 which i offered and got the property, how do they quote this when the owner wanted more, they are some Jenman system, crappy system if you ask me, i would have gone up to $810,000 if i had to.

# Tiron said on April 12, 2010 2:52 PM:

Great idea and I would support it.

To Duetto, it is clearly obvious that the agent you were dealing with was not a "jenman" agency, as those that are don't market properties that way, unless instructed to by the vendor. Besides, if they were a "jenman" agency they would have also asked you to sign a buyer's price declaration, in which you are asked to put forward the highest price you are prepared to pay. (http://www.jenman.com.au/BuyersPriceDeclaration.pdf)

# Duetto said on April 12, 2010 9:45 PM:

why would i tell a real estate agent how much i am really prepared to spend

# George Rousos said on April 27, 2010 1:34 PM:

The ACCC are advocating that legislation be passed which will impose heavy fines on people who consciously mislead buyers. Interestingly, the proposed legislation not only puts the onus on real estate agents but also vendors who “go along with the game”.

http://experts.realestate.com.au/selling/selling-news-avoid-fines-when-selling-know-your-market

# Gazza said on April 30, 2010 8:55 AM:

I am interested to receive feedback on an agent who is deliberately quoting a lower price for a property which is expected to sell at least $200,000 more at auction. Is this legitimate and is the agent acting in the best interest of the vendor. The agent advises people of this indicative price as they walk in the door.

# Agent86 said on May 6, 2010 5:23 PM:

The associated stupidity problems mentioned are at times a consequence of an unpredictable market. As an agent I am hired to provide the best possible exposure for my client's home or investment & negotiate on their behalf in order to gain the greatest yield.

I am a marketeer & a negotiator, nothing more, I am not a bank evaluation specialist.

This point I make clear to all my prospective vendors. And I believe this should be true for all Real Estate Agents.

# roger said on May 11, 2010 6:09 PM:

Two properties on the same block side by side one originally quoted $500k plus then changed a week later to $510 has more wanted features than the one next door which is quoted at $580 to $630. Two different agents .When i spoke to the company representative about his companys noticable large difference in the quoted price to the actual sale price of other properties his company has sold recently he said that his company was better than the other agents .uderquoting is alive and well no surprises here.

# Agent86 said on May 12, 2010 11:03 AM:

That is a rather interesting scenario you came across Roger. Were the properties on the market at the same time? If not how many months apart. Do you know what the end results were for both properties? I would happy to clarify for you whether it was genuine underquoting or not if you can provide me with those sets of information.

# Agent86 said on May 12, 2010 11:50 AM:

Regarding your question Gazza,

If there is sufficient evidence to suggest that the property will achieve $200,000 more at the Auction yes you may percieve this as underquoting, unless of course were talking about a property that is worth $20mil in which case a $200,000 discrepancy wouldnt be of much concern. Is the agent acting in the best interest of the vendor? In some ways yes, as it may create more activity on auction day.    

# Peter Mericka said on May 12, 2010 11:55 AM:

There is always a conflict of interests when the person advising on the sale price seeks a cut of the sale proceeds.  It starts and finishes there.

Eliminate this conflict of interests, and the rest of the stupidity disappears.