Navigating the world of real estate auctions can be tricky, especially when it comes to understanding price guides. An auction guide, provided by the real estate agent, is meant to give potential buyers an idea of the property’s expected selling price. However, it’s crucial to understand what an auction price guide is, how it’s formulated, and how to interpret it accurately to avoid disappointment and make informed bidding decisions.
Image alt: Bustling auction house filled with eager bidders vying for property.
The Agent’s Perspective: Quoting Strategies
Real estate agents use auction price guides as a strategic tool to generate interest in a property. Their approach often hinges on attracting a wide pool of potential buyers. As the saying goes in the industry, “Quote it low, watch it go; quote it high, watch it die.” This means:
- Underquoting: Setting a lower price guide can attract more buyers, leading to increased competition and potentially driving up the final sale price. Buyers are more likely to invest in inspections and contracts if they believe they have a chance at securing the property.
- Overquoting: Setting a higher price guide may deter potential buyers, resulting in less interest and a less competitive auction.
Ideally, an agent wants to quote a price that reflects the property’s true worth to attract serious buyers without scaring them away. However, unintentional overquoting can sometimes occur, although agents typically avoid deliberately setting a price higher than their expectations.
Auction Guide Options in NSW
In New South Wales (NSW), agents have different approaches when quoting an auction price guide:
- Exact Price: The agent quotes the precise price range specified in the agency agreement. For instance, if the agreement states $700,000 to $750,000, that’s the quoted range. This is a less common practice.
- Single Price: Agents might quote a single price, typically the lower end of their price range. For example, a quote of $700,000 could suggest a range of $700,000 to $770,000, as the allowable range is usually 10%. However, agents can quote any price within their range, so buyers should exercise caution when making assumptions.
- No Price Quote: Some agents avoid quoting a price altogether. While frustrating for buyers, they often provide a list of recent comparable sales to give you an approximation of expected price.
Image alt: Real estate agent gesturing towards a man bidding at an auction.
Offers and Rejected Bids
There are regulations regarding how agents handle offers during a sales campaign. If a buyer makes an offer that the vendor rejects, the agent shouldn’t quote a figure below that rejected offer anymore. However, this rule has loopholes. For instance, if the agent hasn’t formally received a written offer or the vendor hasn’t officially acknowledged it, the agent might disregard the rule.
Owner’s Price Expectations
Another factor to consider is the owner’s price expectation, which is often higher than what buyers are willing to pay. Agents don’t necessarily want to know the owner’s ideal price if it’s significantly above market value because it could force them to quote an unrealistically high price.
Image alt: Real estate agent shaking hands with a satisfied client after a successful property transaction.
The Importance of Independent Research
It’s crucial to remember that the agent represents the seller, not the buyer. The best way to protect yourself is to conduct thorough research. Don’t blindly add a standard percentage to every auction price guide. Instead:
- Do your homework to determine the property’s actual market value.
- Consider consulting a professional for assistance.
- Use your findings to establish a bidding limit if you decide to participate in the auction.
