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Unscrupulous real estate agents may be inflating property prices by misleading buyers, a leading property expert has warned.
In competitive suburbs, agents frequently play potential buyers off against one another to push up the price of a property, director of SQM Research Louis Christopher said.
“During hot markets, the private treaty system of selling a property can become completely untransparent,” Mr Christopher said.
In areas with high buyer demand, the seller and agent may deliberately put the asking price of the property below market value, he said.
“They do this to try and drum up interest in the property, with all the buyers thinking they're going to pick up a bargain,” he said.
Many agents then tell buyers that multiple offers have been received and they must offer a higher sum, he explained.
He said the buyer in this situation has no way of knowing whether the agent is being honest about the offers on the table.
Mr Christopher believes auctions tend to be fairer because all offers are made openly in the presence of other buyers.
“I would prefer that over a situation where, as a buyer, I am having to try and trust a real estate agent that there is another buyer out there,” he said.
Mr Christopher called for a more open property market with clear indicators of value.
“We need strong transparent property markers where all the participants are aware of what fair value should roughly be and that no one gets deceived,” he said.