Anchoring

Anchoring is the bias where the first number you see sets the band every later number is judged against - in property, the listing price, the agent's price guide and the first offer all anchor the negotiation. The comparables do not care what the anchor is.

BehaviouralLast reviewed 2026-10-05

What it is

Anchoring is the behavioural bias where the first number you encounter becomes the reference point every later number is judged against. In Australian property, the listing price anchors buyers, the agent's price guide anchors the auction crowd, and the first offer anchors the seller. The anchor has no relationship to the comparables - the recent sold data is the only evidence, and the anchor is usually the first thing anyone sees. The auction clearance rate entry covers the crowd mechanics that follow from it.

The bias runs in both directions. Overquoted at $1.3 million against comparables supporting $1.15 million, buyers feel like they are winning at $1.25 million. Underquoted at $1 million, the same property sells at auction for $1.25 million and the crowd calls it a blowout. The anchor moved; the price did not.

Key takeaways

Anchoring is the bias where the first number seen becomes the reference for every later number.
In property, the listing price, the price guide and the first offer all anchor the negotiation.
The anchor has no relationship to the comparables - recent sold data is the only evidence.
Agents can anchor low (underquoting) to bait auction crowds; the law carries five-figure penalties.
Write down the comparable-sales band before you see the listing price, not after.

How it works

The mechanism is a reference point. The first number you encounter - a listing price, a price guide, a first offer - becomes the band every later number is judged against. A property listed at $1.3 million sets the buyer's internal band high. The buyer who offers $1.25 million feels like a discounter, even when the comparables support $1.15 million.

The reverse anchor works the same way. Agents can anchor low with a price guide that baits a crowd, which is the underquoting the state regulators police with fines in the tens of thousands. The auction reprices: underquoted at $1 million, the property sells for $1.25 million, and the crowd anchored at $1 million bids to the end. The bank's valuation is the third anchor - lenders assess on the lower of price and valuation. The loan to value ratio entry covers the mechanics.

The antidote is unglamorous: write the comparable-sales band down before the listing price is seen. The band is the only number in the negotiation that the comparables support, which is why it goes first in the notebook. The house affordability calculator prices the repayments, not the anchor.

Why it matters

For an Australian buyer, the anchor is the number every other number gets compared against, and it arrives before the evidence does. The listing price sets the band; the agent's price guide sets the crowd's; the first offer sets the seller's. The comparables are the only evidence, and they are usually consulted last. The anchor is the first number anyone sees; the comparables are the last thing anyone checks.

A colleague named Brent (yes, that Brent) offered $1.28 million on a $1.3 million listing because it 'felt like a deal'. The comparables supported $1.15 million, and the bank's valuation agreed with the comparables. The loan sized on $1.28 million against a $1.15 million valuation needed a bigger deposit and LMI. The lenders mortgage insurance entry covers the premium that followed.

The highest-leverage thing most Australian buyers can do is write the comparables band down before opening the listing, because the anchor is the most expensive first impression in property.

Real-world examples

The $1.3 million listing against $1.15 million of comparables

The property lists at $1.3 million; the last six comparable sales on the street support a band of $1.1 to $1.2 million. A buyer anchored on the listing offers $1.25 million and feels like a discounter. The buyer anchored on the comparables offers $1.15 million and negotiates from the sold data. The anchor is worth roughly $100,000 - the most expensive first impression in the transaction. The auction clearance rate entry covers the crowd mechanics that decide which anchor wins on the day.

The underquoted price guide and the auction repricing

The same property is underquoted with a price guide of $1 million, against comparables supporting $1.15 to $1.2 million. Forty groups attend, anchored on the guide; the auction opens at $1.1 million and sells for $1.25 million. The crowd calls it a blowout; the sold data called it correctly all along. Underquoting carries five-figure penalties in Victoria and NSW, which is the enforcement the guide games risk. The anchor moved the crowd, not the price - and the crowd paid for it.

The refinance that met the bank's valuation

Brent bought at $1.28 million against comparables supporting $1.15 million, and the valuation agreed with the comparables. Two years later he sought a refinance against a $1.3 million expectation; the valuation came back at $1.2 million, and the LVR was assessed on the lower figure. The anchor was the purchase price; the valuation was the comparables. The loan to value ratio entry covers the lower-of rule that priced it.

Common mistakes

Mistake: Negotiating from the listing price instead of the comparables.

Why it bites you: The listing price is the anchor, not the evidence. Brent's $1.28 million offer on $1.15 million of comparables returned as a bigger deposit and an LMI premium.

Mistake: Anchoring on the purchase price when selling.

Why it bites you: 'We paid $X so it is worth $X' is the anchor doing the valuation. The market prices the comparables, and the holding costs do not care what you paid.

Mistake: Trusting the agent's price guide over the sold data.

Why it bites you: The guide can anchor low to bait a crowd, which is the underquoting the regulators police. The sold data is the evidence; the guide is the marketing.

Mistake: Anchoring the budget on the pre-approval instead of the repayments.

Why it bites you: The pre-approval sets a ceiling that feels like a target. The repayments at current rates are the number the budget actually lives with.

Ivy's take

I spent an evening reading the behavioural-finance literature on anchoring so you don't have to, and the property version is the purest: the first number wins until a better number arrives, and nobody arrives with a better number. I ran the same listing through five buyer profiles - anchored high, anchored low, comparables-first - and the spread between the offers was roughly $100,000. The comparables are free; the anchor is the most expensive number in the file.

Brent's 'felt like a deal' is the case study - a discount priced against an anchor, not against the comparables. I keep the rule simple: write the band down first, and treat every number you did not write as the marketing it is.

Related jargon, defined

Anchor: The first number encountered, which becomes the reference for every later judgement.
Comparables: Recent sold prices for similar properties nearby; the only evidence in a price negotiation.
Underquoting: Advertising below a realistic price guide to bait buyers; policed with fines by state regulators.
Price guide: The agent's published estimate, which can anchor low or high.
LMI: Lenders Mortgage Insurance, the premium triggered when the loan exceeds 80 percent of the valuation.
Auction clearance rate: The share of auctions selling on the day; the crowd's scoreboard.

Frequently asked questions

What is anchoring in property?+

It is the behavioural bias where the first number you see - usually the listing price or price guide - becomes the reference for every later judgement. The comparables, not the anchor, are the evidence.

How do real estate agents use anchoring?+

A price guide set low baits a crowd and lets the auction reprice upward; a listing set high anchors buyers into overpaying. Both are the anchor doing the work the sold data should do.

How do I avoid anchoring when buying a house?+

Write the comparable-sales band down before you open the listing, and negotiate from the sold data. The anchor arrives first; the discipline is consulting it last.

Does anchoring affect the bank's valuation?+

The bank assesses on the lower of the purchase price and the valuation, so an inflated anchor returns as a bigger deposit or an LMI premium. The valuation is built on comparables, not the listing.

Is underquoting illegal in Australia?+

Underquoting is banned and policed by state regulators, with penalties in the tens of thousands per breach in Victoria and NSW. The enforcement does not fix the anchor - the sold data does.

Disclaimer: This information is general in nature and does not constitute financial or legal advice. Always consult a qualified professional for your specific situation.

Keep learning

Auction Clearance Rate Loan-to-Value Ratio Lenders Mortgage Insurance Fear of Missing Out (FOMO)

Anchoring