Underquoting is a contentious issue in real estate, and illegal in Victoria. However, a good property pricing strategy can mean the difference between a highly successful marketing campaign and a total dud! There are times when it is appropriate to lower the advertised price of a property to achieve a higher result.

If the advertised price of a property is too high, enquiry will be low. If the price is too low, the agent will receive plenty of enquiry, but the risk is that the property may be undersold. Provided the price at which a property is advertised is supported by evidence in the form of recent comparable sales, then there is no risk of underquoting. It is important to strike the right balance with a well-considered pricing strategy, and to adjust the price when the market suggests that it is either too high or too low. The balancing act can also be complicated by the type of property being sold and the market specific to that category of property.

A Case in Point: We recently acted for the Executor of an Estate to manage the sale of a 1950’s home in original but poor condition. The property was clearly going to be of interest to developers only. In addition to the estate agent’s estimate of value for the property, we obtained a sworn valuation for the Estate to assist in determining the Indicative Selling Price or Range to be advertised for the property, and their reserve.

While the general housing market was in a growth phase, the market for development properties had just begun a sharp downturn due to the recent collapse of several prominent developers following interest rate rises and increased building costs, including a 43% rise in developer insurance premiums. Both the Valuer and agent provided similar estimates of the value for the property, but they were based on sales prior to the downturn. An Indicative Selling Range of $1,600,000 to $1,750,000 was advertised for the property.

Unfortunately, the result was a poor level of interest, leading us to suggest to the agent to reduce the range. With continued low interest and no bids at auction, we returned to the Valuer for a re-assessment due to the current market response.

The Valuer recommended a lower price range. Our tactic was to advertise a ‘spot’ figure of $1,495,000 and to expand the marketing to reach a broader developer pool. By advertising a ‘spot’ figure, the property would be highlighted to anyone searching on-line in the $1,400,000 to $1,500,000 price bracket.

The tactic worked. Two offers were received at around the asking price. This gave the agent the opportunity to advise the buyers of a competitive situation and request that they submit their highest and best offer the following day.

An offer of $1,600,000 was received and gratefully accepted by the Executor. Although it was at the lower end of the initial estimates by both the agent and Valuer, it proved to be a good result due the rapidly declining market for development sites.

Our client understood the impact that historic sales evidence can have when pricing property in a declining market.

"It’s easy to get caught out” says Phil Hoopmann, Senior Property Manager. “The important thing is to make any necessary marketing changes quickly within the current rules, and let competition do the rest”

Our client’s delight with the result was simply expressed:

The 1950’s home in original but poor condition was going to be of interest to developers.

Phil Hoopmann 0402 890 830 | info@towerpa.com.au | Level 3, 277 Camberwell Rd, Camberwell VIC 3124