property hunters

Property hunters burn cash due to underquoting

Property hunters are burning cash by often spending needlessly on building and pest reports due to real estate agent underquoting.

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Frustrated property hunters are wasting money on building and pest reports because some real estate agents are ignoring rules on price disclosure.

The Real Estate Institute of Australia claims it’s received a spike in complaints from potential buyers who have paid for these reports prior to a property auction, only for the sale price to exceed all guidance and expectations.

“We have received a huge amount of feedback that people are wasting money on building and pest reports prior to auctions because of a lack of price transparency from a real estate agent,” said REIA President Malcolm Gunning.

“It can also really frustrate people if they have gone to an auction but the property is sold for much more than they thought, and they have still paid for a building and pest report.”

Real Estate Institute of New South Wales chief executive Tim McKibbin added that allegations of price under quoting have a tendency to skyrocket in a rising property market.

“I openly say that there are some agents who are practicing that illegal process and that’s deplorable,” he said.

Stuart Stansell from Sydney’s Sutherland Shire is one such buyer who was caught out by under quoting prior to new rules being introduced in 2016.

“We paid for a building and pest report after being given a price guide from a real estate agent that was within our price bracket.

“The reports turned out fine, and so we went to the auction expecting to bid but the opening offer was $80,000 above the top end of the price range and the property eventually sold for $50,000 more than that again.

“We felt that the agent just wanted as many people at the auction and so he under quoted to drive the price higher,” said Mr Stansell.

Kerrie Clifford of Tweed Heads is another frustrated property hunter who’s found it difficult to get NSW and Queensland real estate agents to provide prices on many properties.

“Because I live near the state border you have two different rules and real estate agents are just telling buyers to make an offer without giving them any guidance on properties listed without a price,” she said.

“In 2016, the NSW Department of Fair Trading received 266 reports of underquoting compared to 236 reports in 2015.

“The increase in reports is attributed to the high profile and interest in underquoting in the NSW property market,” said a spokesperson from the department.

To manage the complaints around price under quoting and paying for building and pest reports, the NSW Real Estate Institute is talking with the NSW Department of Fair Trading around making the reports freely available to potential purchasers irrespective of whether the property is going to auction or not.

“What we are trying to do is to have these building and pest reports added to a sale contract, like they do in the Australian Capital Territory,” said Mr McKibbin.

“The fall back option would be to be able to have a central registrar of these building and pest reports because it is a bit hit and miss with real estate agents knowing if a purchases has done a building and pest report,” he said.

“The policy reason behind all of this is to try and reduce the costs to the potential purchasers.”

If this were to be introduced in NSW, the owner selling the property would foot the bill for both reports, which are estimated to cost anywhere from $500 and $1000 dollars plus.

Building and pest reports are commonly carried out during a cooling off period and at the buyers expense once an owner has accepted an offer and a contract has been signed.

But the process becomes more complicated when an auction is involved, because there is no cooling off period, so the reports are usually done before offers are accepted.

This means that multiple bidders could all be paying for very similar reports from either the same suppliers of different builders and pest experts.

In a statement, the NSW Department of Fair Trading said “the NSW Government is not currently considering any further changes in relation to the provision of pest and building reports to prospective buyers.”

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