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A leading property expert is calling for the real estate industry to be more transparent with property prices.
Speaking with Real Estate Business’ sister publication, Smart Property Investment, director of SQM Research Louis Christopher said there were cases of agents inflating property prices by misleading buyers.
In competitive suburbs, agents frequently played potential buyers off against one another to push up the price of a property.
“During hot markets, the private treaty system of selling a property can become completely untransparent,” Mr Christopher said.
In areas with high buyer demand, the seller and agent were deliberately putting the asking price of the property below market value.
“They do this to try and drum up interest in the property, with all the buyers thinking they're going to pick up a bargain,” he said.
Many agents then tell buyers that multiple offers have been received and they must offer a higher sum, he explained.
He said the buyer in this situation had no way of knowing whether the agent was being honest about the offers on the table.
Mr Christopher believed auctions tended to be fairer because all offers were made openly in the presence of other buyers.
“I would prefer that over a situation where, as a buyer, I am having to try and trust a real estate agent that there is another buyer out there,” he said.
Mr Christopher called for a more open property market with clear indicators of value.
“We need strong, transparent property markets where all the participants are aware of what fair value should roughly be, and where no one gets deceived,” he said.
Principal of Cunninghams Property John Cunningham told Real Estate Business property prices were the product of market conditions.
“You’re pricing a property at a point in terms of a pitch price and by the time it goes to market, there’s been a significant change in the marketplace. And by the time it gets to negotiations, there’s been significant shifts over a period of months,” he said. “Over the past three to four months in particular, you could see that value increase by 10 per cent.”
Mr Cunningham agreed that auctions were the ultimate test of the market, but added that the same level of competition that was driving up prices in auctions was also being felt in private treaty sales.
He also shared Mr Christopher’s sentiment that there needed to be more transparency in prices, saying agencies needed mechanisms in place that enabled buyers to feel comfortable in purchasing a property by private treaty.
“This is an area that I believe needs to be really tightened up. In our office, for example, we have a complete disclosure process. We don’t have any blind offers. All our offers are transparent. Some buyers and agents think this is wrong. Our job is to get the best price for the seller and the only way we achieve that it is through a transparent, competitive environment, and by disclosing where offers are at,” he said.
Mr Cunningham said his offices only accepted offers in writing and these offers were made available to prospective buyers.
“It just means that buyers have the confidence to bid on a private treaty property knowing there is order and transparency throughout the process,” he explained.
- <p>I agree with George Rousos and Mr Cunningham. I only accept offers in writing. Where there becomes multiple interest during Private Treaty negotiations all new and existing buyers are made aware of the status and asked to re-submit their final interest by a set date and time (I also have a copy of the contract sent to each buyers solicitor with a cover letter explaining the same. This allows them to review and ideally show their intent on a signed contract with 66W). The feedback on this process has been received favourably from the marketplace. This process has removed "the agent is playing games" tag!! Consumers - vendors and buyers - want transparency & honesty so they can ALL weigh-up their respective options and risk fairly. It is our duty as professionals to protect the interest of our client (the vendor) and instill trust with the buying public.</p>0
- <p>The issue of silence in price negotiations always amounts to conduct that is misleading or deceptive when the information being withheld is relevant to the decision of the other party.It becomes common when an outside party is seeking information about another offer that has been accepted by the vendor prior to the signing of contracts. As long as the first buyer is aware of the disclosure(a written request forwarded on)there isn't an issue. Also,it's not in the vendors best interest at all to use secrecy and deception to achieve a higher than expected sale price - it just gets you offside with the market and leads to litigation. Also,the vendor is always in a position to reject any offer that is only slightly above the offer they have already accepted.<br><br>On another note "Private auctions"(without an auctioneer and written bids)work well when there are multiple buyers seeking information about competing bids. This too avoids conduct that is misleading or deceptive.</p>0
- <p>"In competitive suburbs, agents frequently played potential buyers off against one another to push up the price of a property". This actually creates a competitive market as when the tide turns and it becomes a buyer's market the buyer's play the vendors off against each other also. At the end of the day it isn't fair on a buyer that is paying fair market value or more to have his offer disclosed to another buyer. You may as well go under the hammer under normal auction conditions than create an unethical Dutch auction which will only give office a bad name and lose future business.</p>0
- <p>Disclosing written offers (price and conditions) to other buyers is not working in the best interest of the person who employs and pays you....THE SELLER! Buyers and market forces determine value....buyers will pay what they are comfortable to pay, they have access to unlimited research avenues to make their own informed decision as to fair market value however if another buyer decides to pay more then they will miss out. It is not up to us as agents to gatekeep the price, allowing buyers to make their own decisions and working in our sellers best interests is where it is at.</p>0
- <p>There is a difference between transparency and dishonesty.<br>Lets not forget we work for the seller. In the market today, buyers have so much information for them to see what presents value or not. Its up to them to research what is fair or not. <br>Competition is good. There will always be a loser the one who missed out and will blame the system or the agent. <br>Do your research, determine for your self what is a fair price to pay.</p>0
- <p>I agree with Mr Cunningham in respect to transparency however I do not agree about auctions being fairer. As an agent it is your responsibility to do the best you can. With a population of 8,300 and 8 real estate agencies in a regional area, we know for a fact that auctions do not work to the best advantage of the seller. Our agency has and always had transparency with the prospective buyers, giving them disclosure on offers which again are always placed in writing.<br>Working as a real estate agent it is up to you to you make the commitment to be responsible, trustworthy, pro-active for the seller ensuring they have the confidence and trust in you selling their most prized possession.</p>0
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