Underquoting a property
Underquoting is the number one tactic that some real estate agents will use. Underquoting is so common in the Melbourne and Sydney markets that most buyers know to add around 10-20% to the advertised price.
In the real estate industry, the old saying is, ‘quote it low and watch it go, quote it high and watch it die.’. Underquoting is a standard tool to increase interest in a property. The idea for underquoting is to get as many people interested as possible and play them off each other to drive the sale price higher.
Real estate agents consider that if two (or more) people fall in love with a property, they’ll be willing to go over their budget to secure the sale. For example, if your budget for a home is 600K, and your initial offer is rejected, is it challenging to go over your budget a little? Most people can find 10-20K more, and real estate agents rely on this to get the highest possible price.
But why not just advertise the property at the actual price? Real estate agents are looking to attract people in a different budget range. For example, if a property is advertised at $650K, they may only get interested parties with budgets of $650-700K. But if they lower the price, they’ll also attract people in the $550-600K budget.
The selling agent isn’t too worried about the person with the lower budget not being able to afford the actual price, as this person’s job is to boost the final sale price. Besides, they’ll have plenty of other properties to show them, and as a bonus, they understand this person’s actual budget.