Buyers beware: These are Melbourne's underquoting hotspots

Sydney Morning Herald

a day ago

In this year-long investigation, we are lifting the lid on an open secret in Australia's property market that is costing buyers millions. See all 5 stories.
There was plenty to like about the cream-brick house. The generous block, the location, a park and playground just around the corner. But Josh Haywood's buyer's agent had a warning as they texted him the link for the listing and asked for his thoughts.
The agent responsible for the sale was 'one of the bigger underquoters in the inner north currently so we can expect this to [sell] above the range', they cautioned.
While the practice of providing misleading price guides is rife across the city, with just over half of homes selling above the highest estimate given to buyers, an 18-month-long data investigation by The Age and Sydney Morning Herald analysing almost 26,000 auction listings in Melbourne found that swaths of suburbs in the north and east of the city were notable hotspots.
The house Haywood looked at, in Fawkner, was located at the beginning of Melbourne's northern underquoting belt, which starts in the suburbs of Thornbury and Coburg, where about seven out of 10 properties tracked in this masthead's data sold above the top end of the guide.
The situation is worse further away from the city, in postcodes such as Keilor Downs, where close to 90 per cent of properties tracked sold above the top of the guide and homes sold on average $69,529 above the top of the range.
In the eastern suburbs, many homes sold for hundreds of thousands of dollars above the top of the advertised range. In Ringwood North, Blackburn North and Blackburn South, at least eight in every 10 properties sold above the top end of the guide.
A gap between the advertised price and the sale price, as exposed in this investigation's data, is itself not necessarily proof of underquoting, but underscores the challenge buyers face, as most properties sell above the top of the supposedly 'indicative selling price'.
Under Victorian law, advertised price guides are meant to be 'reasonable' and, in most cases, consider the sale prices of three comparable properties, but there is no requirement for the listing price to align with the vendor's reserve unless it is disclosed to the agent before the auction.
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Traversing budgets and corners of the city, real estate experts say these underquoting regions likely have one thing in common. It's not the types of houses for sale, or even the buyers who frequent the areas, but the agents.
They say underquoting is more common in areas where there are more agencies with a culture of using the technique. And once it takes hold, it spreads.
'We have created a rod for our own back in this industry,' Melbourne buyer and vendor advocate Wendy Chamberlain said.
'The industry now has a reputation that there's underquoting. And so buyers out there think they will add 10 per cent. So when you have a real estate agent that is doing the right thing – and there are ones that do the right thing – they get disadvantaged.'
Saul Zuvic and his partner spent two years looking to buy a small home in Melbourne's inner north, but he said properties advertised in their budget, which could stretch to $650,000, typically went for 'a hell of a lot more' than initially listed.
In February, the 34-year-old attended a public inspection for a two-bedroom house in Pascoe Vale South advertised at $630,000 to $680,000, only to overhear the real estate agent telling someone on the phone the vendor had already rejected an offer of $690,000.
Zuvic said that when he confronted the agent about the price, he admitted that they had received the offer of $690,000 more than a week earlier, but the seller wanted to see what they could get at auction.
'I said to him, 'I'm only here because you said it was $630,000 … Why haven't you updated the price?'
'And he kind of has a laugh about it and says, 'Oh yeah, I've been meaning to get to that.'
'But we're not idiots, we know why they do that – it's to drum up more interest and get more people at the auctions.'
In an attempt to make sense of confusing price guides in the inner and middle north, Josh Haywood and his wife hired a buyer's advocate earlier this year. The extra service cost about $15,000.
Haywood does not regret the spend – he has since bought a home in Reservoir – but he argues it could have been avoided if the advertised estimated selling prices were more accurate and there was less secrecy around the vendor's reserve.
'[The buyer's agent] knew all the real estate agents,' Haywood said. 'And when we would send him properties we were interested in, he would say, 'You will never get that [at that price]. That agent is known for underquoting. It will go for this much.'
'Or, if he [the buyer's agent] knew the agent, he would say, 'I've spoken to them. The reserve is X amount. It's outside of your budget, and so you'll never get it, so don't waste your time with building inspections and going to auctions.''
Property experts and real estate agents also told this masthead's investigation that agents would cherry-pick properties to include in the statement of information.
Perhaps the comparable properties for a four-bedroom home would include a three-bedroom home, or a home for sale on a full block of land would be compared to townhouses, buyer's agent Julie DeBondt-Barker said.
'Most buyer's advocates can tell when the agents are lying,' said DeBondt-Barker, the founding director of Property Home Base. 'The sad thing is a lot of buyers can't. Many don't know to check the statement of information, and when they do, they just look at it like it is the gospel.'
As buyers head out into the far north, north-east and north-west of the city, the problem intensifies in suburbs where they are often hunting affordability. The investigation found that in Tullamarine, Gladstone Park, Taylors Hill, Westmeadows, Mill Park and Greenvale, where the median house price sits between $600,000 and $900,000, at least eight in every 10 tracked properties sold above the top end of the guide.
Melbourne buyer's advocate Cate Bakos said the property market in Melbourne's middle and outer northern ring was competitive because homes typically fetched less than $1 million (bar a handful of pricier postcodes such as Preston and Thornbury), driving strong demand from first home buyers and investors from across the country.
Still, there were hotspots on the other side of the city that attracted buyers with larger budgets.
'In the south-east and the east, the market that we're talking about is pretty much the $1.2 [million] to $2.4 [million] market, [and] there's a lot of townhouses and smaller houses in the mix that are being underquoted,' Bakos said.
Overall, the investigation found that across the city, townhouses were most likely to sell outside the advertised guide, with more than 56 per cent of tracked properties fetching more than the top of the published range. More than 53 per cent of houses also sold above the top price guide.
Apartments were least likely to be advertised with misleading price guides, with almost 55 per cent selling within or below the indicative selling price.
Between January 2024 and June this year, 38,055 homes sold at auction in Melbourne. Over the same period, this masthead collected data from 25,830 properties that were listed to go under the hammer.
Bakos said she was somewhat perplexed by the question of what was driving the higher rates of underquoting in Melbourne's east and north. Like other market experts, she said the practice could be contagious.
'When one starts [underquoting], how do the others deal with it? The more that jump, the more pressure there is on every agency to price their vendors' properties attractively to still attract buyers. It is a really tough one.'
In the east and south-east, houses in the suburbs of Clayton, Blackburn, Glen Iris, Ormond, Carrum and Hawthorn East sold on average at least $92,000 over the top end of the price guide, according to this masthead's investigation.
In Blackburn North, houses sold for an average of $113,687 above the top of the guide, based on an analysis of 60 sales since January 2024.
Security consultant Luke Percy-Dove said he developed his own price-guide formula after attending about 80 open inspections in the east and south-east when searching for a new home in 2023: 'Whatever the agent told, us we were to add $200,000.'
Percy-Dove recalled attending an inspection at a home in Doncaster East, advertised in February 2023 with a guide of $1.15 million to $1.2 million. It later sold for $1.48 million, almost $300,000 above the top end of the guide.
'You'd think the footy match was on that day at that address, there were that many people … but it was only because the starting price range was so outrageous,' Percy-Dove said.
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Buyers told this masthead they wanted transparency. They argued that most of the time real estate agents knew what a vendor wanted, or should be able to provide an estimated range closer to the eventual selling price.
'Don't drag the youngsters through the whole process of inspections and talking to them and then going through finance only to break their hearts and make them realise they have no chance of getting the property,' Percy-Dove said.
'Why waste everyone's time? … Just be honest. Be transparent.'