Real estate ads understate prices 40 percent
A report by the Victorian Government of 936 property auction advertisements in four newspapers between October and November 2001 showed that there was a gap of up to 40 per cent between the prices advertised and the final sale prices. The most accurate prices were found to be in the ads which supplied a price range.
The report has underlined the Government's move to regulate against of price quoting for properties, with over- and underquoting being common practice. The report found that when a specific price range was quoted, the final sale price varied only by 6.9 per cent from the middle of the range and 0.9 per cent from the top of the range. But when a range wasn't specified the average price variance was 9.6 per cent. The greatest variance occurred when a vague non-specific figure was quoted – such as $260,000+. Then the average variance jumped to between 15.8 per cent and 39.6 per cent.
The Victorian Consumer Affairs Minister, Christine Campbell, said that the practice is widespread enough to be of concern to the Government. The report will be used to monitor real estate agents' quotes and if their advertised prices are consistently 15 per cent or more or less than final sale prices they may be investigated.
Wakelin Property Advisory's Monique Wakelin said that it will difficult for the Government to enforce the new rules. Underquoting fuels dummy bidding, she said, and severely underquoting attracts the wrong group of bidders to an auction. There's then a need to artificially stimulate bidding so that prices meet vendors' expectations.