Ever wondered why agents underquote? The simple answer is because it works. This may not be a popular view of underquoting and as frustrating as it may be, underquoting is a necessary evil in Melbourne’s auction system.
Growth in property prices this year has highlighted the widespread practice of underquoting and the frustration of buyers who miss out when properties sell for much more than the advertised estimate.
Ironically, the practice that frustrates buyers is the same one that enables the auction system to work in the first place.
When a real estate agent auctions a property, the vendor is paying them a fee to achieve the highest possible price in the prevailing market conditions. To achieve this, the agent must do their utmost to maximise the intensity of competition on auction day.
At any given auction the bidders will have a range of spending limits. Some limits may be close to the advertised sale price estimate, whilst others may be much higher. By competing in the auction up to their respective price limits, each underbidder plays a vital role by increasing the intensity of competition.
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