This suburban street says so much about the problem with auction price guides

Sydney Morning Herald

5 days 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 4 stories.
The homes on Veronica Crescent, a snaking street in Melbourne's suburbia, look much the same.
Made of brick and of similar age, many have a neat patch of grass in an unfenced front garden, peppered by droppings from the neighbourhood kangaroos.
The houses also have something else in common.
Every auction in this quiet crescent over the past two years has been overseen by just two local offices of well-known real estate brands: Ray White Mill Park and Barry Plant North Eastern Group.
And in this time, none of the 10 homes sold changed hands within the advertised price guide.
Each fetched at least $70,000 more than the top end of the estimated selling price range provided to prospective buyers, according to Domain data.
One family home, listed by Ray White, recently sold for almost $200,000, or 30 per cent, above the top of the guide.
Veronica Crescent in Mill Park isn't an anomaly. Rather, it's a microcosm of a wider pattern that has taken hold across swaths of the city and fuelled hot debate about the extent of underquoting.
A property selling above the top of its advertised range is not necessarily, of itself, proof of underquoting, but the high prevalence of guide-busting sales has led to concerns the practice remains a widespread scourge on the industry.
An investigation by The Age and The Sydney Morning Herald, analysing more than 36,000 property sales in Melbourne and Sydney across 18 months, has identified dozens of large real estate firms whose advertised price guides are almost always exceeded by the eventual sale price.
Among them are franchisees from Australia's largest real estate group, Ray White, as well as celebrated 'young guns' of the industry, Bentley-driving top-commission-getters and agencies throughout Melbourne's leafy eastern suburbs and newer housing estates in the north.
In the most extreme cases, some local real estate offices are selling more than nine in every 10 of their listings above the top estimate given to buyers, according to this masthead's data.
'Price guides are more theatrics than anything,' said Melbourne buyer's agent and M R Advocacy director Madeleine Roberts. 'It's part of their strategy ... to keep that price lower, to bring more numbers through. I hear it time and time again [from agents].'
The practice of deliberately setting low price guides has become so ingrained, industry whistleblowers and property experts say that agents who don't quote homes cheaply enough to be considered 'competitive' risk losing business and buyers.
'If one agent is accurately quoting a property for $1.2 million to $1.3 million, and the other agent is underquoting a similar property at $1 million to $1.1 million, where do you think the buyers are going to go?' said a veteran Melbourne real estate agent with 40 years' experience.
'They are going to go to a $1 million to $1.1 million property, and the seller in the same street will say, 'I'm going to go with the agent that is getting 40 cars out the front'.'
The Real Estate Institute of Victoria denounced 'any form of unlawful underquoting' and called on the state government to act in response to the findings of the Bidding Blind investigation.
'It is time for the government to genuinely engage with the sector, understand the drivers for underquoting, and work together to develop an effective solution, informed by the agents' on-the-ground knowledge.'
The tale of Veronica Crescent
One Veronica Crescent resident points to a for-sale sign down the road, plastered with a red sold sticker, and remarks: 'I knew it was going to go for more.'
The retiree has lived there for decades, not long after the estate, first known as Blossom Park, emerged rapidly from paddocks in the 1980s.
As others have come and gone, she has noticed one real estate technique becoming commonplace. Whatever the listing price, you can expect the home to sell for more, she says.
The woman could be discussing many streets in Melbourne, based on this investigation's data, which found that when properties in the city sell above the top of the price guide, as Veronica Crescent's routinely have, they do so by about 8 per cent, or $83,000.
When pressed, agents will often argue there are property-specific reasons that a sale tops the guided price.
Veronica Crescent is no different.
On a Saturday in autumn this year, two homes in the street went under the hammer.
The first – at 53 Veronica Crescent – was advertised by Ray White Mill Park with a price guide topping out at $660,000. No home had sold in the street via auction for less than $700,000 in the five years before, according to Domain.
This three-bedroom home went for $852,000 – a result that was $192,000 above the top end of the price guide.
In justifying the advertised range, Kon Kouvas, the director at Ray White Mill Park – though not the agent who set the guide or conducted the sale – initially said the 'conservative' price guide was set because of the 'uninhabitable condition' of the brown-brick home, a deceased estate.
Kouvas said there was a critical structural issue in an en suite's floor that required urgent attention, and that 'due to the unique circumstances and condition of the property, it was sold without comparable sales as a reference point'.
When pointed to online advertisements from the time showing Ray White telling buyers that, if they wished, they could simply move into the property and 'enjoy as is', Kouvas agreed he had used the wrong terminology by describing the property as uninhabitable.
He said the condition of the home was better described as 'original state requiring significant renovation'.
An hour after 53 Veronica Crescent was sold, another auction was held, a 400-metre walk down the road in the May sunshine.
That home, at No.8, also beat expectations, selling 11.7 per cent above the top of the guide.
While the gap between the advertised price and final sale was not as jarring, the initial listing still raised eyebrows.
This was because the agent responsible for the sale, Barry Plant agent Con Kara, advertised the home at a price lower than he had sold the same property for almost four years earlier.
In May 2021, the three-bedroom property went under the hammer for $827,000.
Come this year, the home, described in the listing as 'beautifully maintained', was advertised for between $700,000 and $770,000. It sold for $860,000.
Median house prices in Mill Park had risen by about 10 per cent in the four years since the earlier sale and relisting, according to Domain quarterly data.
However, Barry Plant chief executive Lisa Pennell said it was unfair to judge the listing price of a single property using headline trends because many properties sold during the pandemic property 'bubble' had later resold at a loss.
'It's important to understand the difference between headline data (like medians and averages) and individual property price data because rarely is Australian property homogenous … and so headline data or trend data cannot tell the story of individual property sales, outcomes of which are driven by so many factors, not the least of which is human emotion,' she said.
Pennell also said the condition of the property had significantly deteriorated since the 2021 purchase, necessitating about $9000 of repairs before it was placed on the market again.
'Our review of comparables shows that the … guide was appropriate and honest,' she said.
'It's important to note that another comparable property was launched on the same street at a similar time with a much lower selling range, so it was critical the selling range be as realistic as possible in the face of this competition.'
This masthead is not suggesting these two specific Veronica Crescent sales are proven examples of deliberate underquoting, but they are part of a broader pattern of houses selling above the guide on Veronica Crescent and in Mill Park.
Under Victoria's underquoting laws, last updated in 2017, the indicative selling price presented by real estate agents in the statement of information provided to buyers must 'be reasonable' and, in most cases, take into account the sale prices of three comparable properties.
The advertised guide, which can be a single figure or a range of up to 10 per cent, must also be the same as that agreed to by vendors in sales authority documents.
A property selling above the price guide is not evidence of underquoting in and of itself, if the set price guide was reasonable.
In 116 property sales managed by Ray White Mill Park, more than 97 per cent of properties sold above the top end of the range, by an average of $64,371 or 9 per cent, according to data collected by this masthead. The data spans 18 months, though some sales from the agency would not have been captured.
In response to the findings, Kouvas said that compared with other areas of Melbourne, Mill Park had been the recent focus of intense interest from local and interstate buyers. He also pointed to a dozen Mill Park properties listed by Ray White's competitors that had recently sold for between 15 per cent and 25 per cent above the high end of their final advertised guide.
Four Ray White offices – in Mill Park, Gladstone Park, Craigieburn and Taylors Lakes – sold at least 85 per cent of their listings above the top end of the highest estimate given to buyers, according to this masthead's data.
One former real estate agent who worked for a Ray White office in Melbourne's outer northern suburbs through the pandemic, who didn't want to be named to discuss confidential information, said the culture at his former workplace was to 'quote the property as low as possible that they could get away with'.
'Sometimes it was $100,000 less than what the owner wanted, or it was worth,' they said.
The former real estate agent said the low price guides were justified on the statement of information, which is meant to list comparable properties, by using inferior ones.
'You can say, 'Oh, there's a similar three-bedroom property,' but really, when you go and see it, it's smaller and the finishes aren't as nice.'
In Sydney, the Ray White agency led by the man who calls himself 'Australia's No.1 real estate agent', 30-year-old Josh Tesolin, had been advertising auction guides that fell 19 per cent or $180,000 below the advertised auction guide on average, according to an analysis of 412 sales by his Quakers Hill office.
The Bentley-driving agent's relationship with Ray White was terminated in July by 'mutual agreement' after an investigation by this masthead into Tesolin's business conduct.
Tesolin, whose business has been rebranded under NGU Real Estate, denied any wrongdoing, saying that Ray White Quakers Hill was compliant with NSW price guide rules.
However, as the Bidding Blind investigation was published on Saturday, NSW Fair Trading slapped a four-month licence suspension, pending possible disciplinary action, on Tesolin and his private real estate company, Tesolin Consulting, over allegations of serious and repeated breaches of the law.
The allegations include more than 100 cases of underquoting by Tesolin, all while his corporate interests operated under the Ray White Quakers Hill banner.
A spokesperson for the Ray White Group, which claims to sell three times as many properties as the next largest real estate group in Australia, said that while auction results were impossible to predict, data from across offices in Victoria and NSW showed that Ray White agents overall were 'very good at guiding appropriate prices at the start of a campaign, despite not being trained valuers'.
The data shows about 61 per cent of the group's Victorian private and auction sales sold above the top end of the guide in the past financial year, mostly by less than 10 per cent. About 38 per cent of properties sold within or below the guide.
'We certainly do have proof of a lot of runaway auctions in fast-moving areas, too,' the spokesperson said.
Of the 210 sales overseen by Barry Plant North Eastern Group analysed as part of the investigation, more than 87 per cent sold above the top of the guide. The average miss across all the sales was $68,744 or 8 per cent. Fifty-three properties sold for at least $100,000 over the top guide.
Barry Plant's Pennell said that if an agency was consistently selling properties for more than 10 per cent above the quoted range, she would consider that a potential red flag around integrity, but 'that is not the case here'.
'A close review of the process and sample audits confirms that the price guides for each property are set in agreement with the vendors and are based on realistic comparable sales,' she said. 'We understand the regulator has also conducted spot audits in this office, as it does with many offices, and has been satisfied with the processes followed.'
More than $100,000 above the top guide
In Melbourne's eastern suburbs, there are agencies that routinely sell homes for prices more than $100,000 above the top estimate given to prospective purchasers, according to this masthead's data.
One is Box Hill-based agency CHN Real Estate Group.
The company is directed by 'young gun' auctioneer Calvin Chan, and Jim Chen.
In 2022, Chan was crowned one of Victoria's top agents aged under 36, overseeing close to $200 million in sales in a single year.
Chen has also made the list of the country's top agents, previously netting more than $103 million in annual sales, though he has not been working as a lead agent responsible for setting price guides in the past year, according to online listings.
Over 18 months to June this year, CHN Real Estate Group properties sold for an average of $109,047, or 9 per cent, above the top end of the advertised guide, according to 173 sales analysed by this masthead. Almost 90 per cent of these homes sold above the top end of the guide.
In March this year, as a coffee van pulled up to a three-bedroom home in Blackburn at a CHN auction, buyer's agent Julie DeBondt-Barker predicted: 'I think they've underquoted it.'
DeBondt-Barker, the founding director of Property Home Base, had independently picked the listing before the sale, suggesting it could be an auction to watch because she believed the price guide of $1.2 million to $1.25 million was misleading, based on nearby sales.
'This is a really tightly held area … The lake is nearby. People stay here for many, many years … I'm thinking this will probably head towards $1.4 million.'
The result would be frustratingly familiar to many navigating Melbourne auctions.
Although bidding reached $1.325 million, $75,000 above the top end of the guide, the property didn't sell at auction because the seller's reserve was not met. DeBondt-Barker's prediction was validated when the home sold shortly after the auction for $1.375 million.
A property failing to sell at auction, even once the guide is exceeded, is not of itself proof of underquoting, which has specific definitions in the law, but it is a particularly infuriating and confusing scenario for buyers.
Also in March, in the neighbouring suburb of Mont Albert, Anthony, a father of four, attended another CHN auction.
The Box Hill resident has helped his daughter on a drawn-out search for an affordable first home and said he had several reasons to be dubious that the two-bedroom unit would sell within the guide of $700,000 to $770,000.
'It's right near a level-crossing removal station ... so the amenity of the area is now a lot better. A lot of young couples are looking for that as a first home. You could just tell at the auction due to the amount of people going through, and the amount of interest they had at the inspection, that it was going to go for a lot more.'
Anthony had also picked up on another potential 'red flag' in the previous sale price. In October 2019, the same brown-brick unit had sold for $855,000, meaning the vendors would need more than the advertised price just to break even.
The sales data for units in Mont Albert is patchy due to low sales volumes, though the available data shows median prices for units declined slightly from the earlier sale to when the unit was relisted in March, from $830,000 to $803,000, according to Cotality.
On auction day, when bidding hit $829,000, attendees began asking if the two-bedder was on the market.
'We're just going to get some instructions, ma'am, but if you help us bid, it will help the owner make that decision,' replied the auctioneer.
The agent and his team were able to cajole offers up to $840,000, at which point the property was declared on the market. When bidding slowed again for the final time, the gavel fell at $860,000, or 12 per cent over the top of the guide. The gap was too much for Anthony's daughter.
Chen, a director at CHN, though not the agent who set the guide or conducted the sales for any of the CHN sales analysed by this masthead, denied that the unit at Mont Albert or the house in Blackburn were inappropriately priced.
Instead, he said that CHN's price guides were determined by a 'disciplined and evidence-based approach' that included assessing comparable sales from the past six months and reviewing buyer feedback through the campaign.
'It is important to note that an owner's original purchase price is not a valid consideration if the purchase occurred more than six months prior, regardless of whether that price was higher or lower,' Chen said.
'Equally, price guides are established by the agent based on available evidence and buyer engagement, whereas the reserve price is set solely by the vendor, often on the day of auction, based on interest levels observed during the campaign.'
Top of the range is the bare minimum
Back on Veronica Crescent, Douglas Wong, 40, stands behind the flyscreen at his front door and says that he believes underquoting has been happening in his neighbourhood.
He's noticed agents lowballing their initial price guide and then raising the estimate as time goes on. This practice can be allowable.
But he said he thought they often knew the initial figure was 'rubbish', which would be a breach of the rules requiring guides to be reasonable.
The IT worker sold a home in South Morang last year. He said his initial reserve price was $800,000, and the agent told him they could get him that.
'But he started off the first week when he advertised; it started off as $650,000 or something like that,' Wong said.
It eventually sold for $740,000.
'We probably need a better law, I guess,' Wong said.
Plenty of market participants and experts would agree.
One veteran real estate agent with 40 years' experience, who did not want to be identified for fear of being seen as a rat in the ranks, said agents knew that the advertised price had to match that of the agency agreement with their seller, but would often explain to sellers that this was simply a 'marketing price', not the figure they truly believed the property would fetch.
'Sometimes, they will even be bold enough to explain [to the vendor], 'Look, if we put $1.3 [million] on the authority, we've got to quote that to the public and won't get anyone turning up, so we've got to put a figure less than that.''
One of the reasons why underquoting has proven so intractable, persisting through tougher laws and vows of crackdowns, is that it often works. Agents are reporting that if they do not list price guides so low, they get fewer people to inspections compared with their competitors.
In other words, low price guides drag down estimates across the market.
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'I can see why they do it,' buyer's agent Roberts said. 'I can see how it's effective. I often see when agents present a property, they'll put the quoted range a little bit higher, and they don't get as many numbers. The next tactic is to reduce that range, and then they get the numbers through. So obviously, it works. That's why they do it.'
Buyer's advocate Scott Hall said that when this was done as a deliberate strategy from the start of the campaign, it was called 'step quoting'.
If an agent expected $1 million for a home, they might begin quoting it at $850,000 to $900,000, then raise the estimated selling price to between $900,000 and $950,000, Hall explained.
'Now they get a whole lot of people engaged,' he said. 'They get them emotionally connected with the property, and then during the sales campaign, to cover themselves [from accusations over underquoting], they raise the quote range.'
Buyer's and vendor advocate Lauren Staley has observed the same strategy of listing a property 'significantly lower than what it's worth' to get people through the door, before the price is raised later in the campaign.
'We tell our buyers every day of the week that the bottom of the range is very rarely an acceptable number [for the seller],' said Staley, managing director of Infolio Property Advisors. 'The top of the range will often be the bare minimum. I just can't see it changing.'
Staley said she had some empathy for agents, who were working within a system where the public had been conditioned to expect homes to sell up to 20 per cent above the price guide.
'I do think that there's got to be some onus on the buyers because it doesn't take me a hell of a lot to work out whether a property is priced accurately or not, and buyers do have a huge amount of data available to them now that they can draw upon to reach a conclusion,' Staley said.
On Saturday, the Liberal opposition slammed the Victorian government for keeping a 2022 review it commissioned into the state's underquoting laws a secret, and labelled Consumer Affairs Victoria, which enforces underquoting rules, a 'toothless tiger'.
'The government should be coming clean and showing what this report shows,' said opposition spokesman David Southwick. 'When people are not doing the right thing, there does need to be consequences.'
On Saturday, the government again declined to explain why it wouldn't release the 2022 property review.
Consumer Affairs Minister Nick Staikos said underquoting was illegal and Victoria led the nation in its efforts to stamp it out.
'We'll continue to go after dodgy real estate agents to make the property market fairer,' he said.