Underquoted? Or did the vendor re-calibrate?

It is peak auction season in Melbourne and despite some busy auction schedules for agency offices, we still have a relative undersupply of property for sale. When we overlay this with increased buyer sentiment, (ie. returning investors, cashed up baby-boomers, motivated first home buyers and upgraders), we still have a market imbalance.

Our auction clearance rates are a perfect reflection of this.

Yesterday offered Melburnians a lot of auctions to choose from, and even with our highest auction bidding list ever, we didn’t have a particularly successful day. Our auction misses were varied, from under-bidder status to being entirely swamped by a mass of bids.

The interesting thing we observed was reserve.

Obviously most buyers in this current climate are quite adept at citing the quoted price range, and many hold the agents accountable at auction when a reserve has not been met despite the bids being carried past the quoted range.

Agent’s fault? Not always.

Underquoting is in the spotlight now because we are seeing a proliferation of mismatched quoted ranges vs sale prices. Some agents are still deliberately underquoting, but many are genuinely shocked at the result. Many vendors are catching on to the improved market conditions and are re-setting their price expectations with each week that passes for the duration of their campaign.

Some results are breaking new records for their street, so we need to recognise that buyer demand can outpace agent expectation, particularly in a market that is fuelled by a combination of drivers.

These two properties below were perfect reflections of extreme buyer demand and an unprecedented price result.

The first auction in Seddon attracted a combination of buyer types. Being a three bedroom townhouse in a boutique block, it’s not surprising that it attracted a few. What is surprising is the price it sold for. Quoted at $750,000-790,000, it sold for $913,500.

All of our comparable sales analysis pointed to a figure in the mid eights.

The following property, an iconic 70’s style house on Carlton’s Canning Street was quoted $1.3-1.4M, yet sold for $1.75M. A sea of Baby Boomers fought it out passionately. Bids flew from all directions and made the vendor’s reserve within the quoted range entirely redundant.

Our auction in Queen Street Lalor was an interesting one to participate in. Quoted at $520,000 – $570,000, yet still not on the market above $615,000, the edgy crowd did heckle the auctioneer somewhat.

Annoying, yes. Justified? yes.

This house directly opposite had only just sold off-market in the days prior for $600,000. Sitting on a similarly sized block, unrenovated and north facing, it was an ideal comparable sale and certainly underpinned the vendor’s new expectations.

Can a vendor change their mind?

Absolutely, they can. Our legislation allows for a vendor to leave the ‘Reserve’ box blank on their auction authority. The agent needs to cite a range or price to the vendor that they believe is achievable, but the vendor is not bound to agree to sell at a particular price until as late as five minutes before the auction

This issue can bite in situations like yesterday’s.

The vendors would no doubt have been privy to the quiet sale once they saw the opposition agency put up the board with a sold sticker. If they established their reserve price in the minutes leading up to the auction, the quote range, (as ridiculous as it was) was not breaching our underquoting laws.

This is a frustration for buyers as they navigate our competitive market conditions, and once again it highlights the need to consider suitable and comparable, recent past sales results.