Underquoting suspected as Warrnambool property sales surge past real estate agent estimates

The Standard identified nearly a dozen examples since March this year, with several properties selling for almost 50 per cent over the top of the stated range.

But south-west agents say underquoting is not happening, it's market forces that's driving prices beyond expectations.

Just last week a vacant block in Woodford sold for $350,000, $110,000 above expectations, while a property in Patricia Street, Warrnambool sold for $584,000 in June, a staggering $184,000 over the top of the range.

"These numbers are not too dissimilar to what we have been seeing in Melbourne, where underquoting has been an issue for a long time," said Cate Bakos, president of the Real Estate Buyers Agents Association of Australia.

Prospective buyers are venting their frustration, with Victoria's real estate watchdog receiving a flood of complaints. Consumer Affairs Victoria recorded a 129 per cent increase in contacts about underquoting in the April quarter of 2021 compared with the same time last year.

The watchdog received 383 enquiries and complaints across the state between 1 February and 30 April.

A spokesperson said investigators were making unannounced visits to regional real estate agents "to monitor compliance with Victoria's underquoting laws".

The Victorian government revised the laws in 2019 in the face of widespread allegations of misleading practices by agents.

Under the new laws agents have to provide a Statement of Information that includes three recent comparable sales. In Melbourne a comparable property must have been sold within the past six months, but in regional areas it can be anything sold in the past 18 months. Local agents said that in a hot Warrnambool market, sale prices were becoming obsolete within weeks, let alone 18 months.

"Prices are moving so quickly that even in three or four weeks an estimate will no longer be accurate," Matt Northeast of Northeast, Stockdale & Leggo, said.

Asked whether agents should take the heat of the market into account when calculating their estimates, Danny Harris of Harris & Wood said that would border on price forecasting.

"It would be guesswork to do it any other way. Otherwise you're asking the agent to be Nostradamus," he said.

Ms Bakos said agents should be able to provide reasonable estimates if they use the most recent comparable sales.

"That means sales that are less than three months old. Anything older than that is just irrelevant," she said.

"I think missing by 40 per cent is unforgivable," Ms Bakos said.

"They really have blood on their hands if they're not picking relevant sales."

Under the 2019 laws, underquoting also occurs if an agent advertises a property at a price that has been rejected by the vendor, is less than the agent's estimated selling price, or less than the vendor's asking price.

If an agent is investigated and found not to have complied with the laws, they risk a penalty of more than $31,000.

Ms Bakos said Consumer Affairs Victoria couldn't deal with the scale of the problem.

"Consumer Affairs is so under-resourced, there is no way for them to keep up with the complaints they're receiving," she said.

"The legislation has to change, it's a terrible system, but agents also need to be held to account and that's just not happening."

Both Mr Northeast and Mr Harris said they believed Warrnambool agents were abiding by the law.

"We know that it happens in metro areas, but historically it hasn't in the regions," Mr Northeast said.

But with the south-west going through what Mr Harris called a "once in a lifetime market", historical comparisons may not be relevant.

Mr Harris conceded that agents may be conveniently avoiding discussing asking prices with the vendors, which could allow them to set a lower estimate.

"There are occasions when there's no way a vendor is going to accept an offer within the quoted range, which is absolutely underquoting," he said.

Questions about underquoting have coincided with a spike in the number of auctions taking place in the south-west.

Auctions in Warrnambool more than doubled over the past 12 months and are still trending upwards. The median house price has risen almost 20 per cent over the same period, outperforming growth in Melbourne.

This is the "new normal", according to Mr Northeast, who sees no reason for the market to cool any time soon.

"Basically all the vacant land has been sold, all the builders are flat out, so the only way this will change is if demand decreases," he said.

With demand running hot, Ms Bakos said underquoting would remain an issue and that it would be buyers paying the price, both emotionally and economically.

"But the main thing is the opportunity cost for buyers, looking at countless properties they could never afford. Meanwhile they miss out on places they could afford," she said.

Ray White Real Estate was contacted for comment.

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