After one weekend of compulsory reserve price disclosure at auctions in Victoria, examples are already emerging of how the new laws benefit sellers, not just buyers.
For one sale, setting the reserve price at the lower end of the guide helped avoid a situation where buyers assumed the vendor was asking the top of the guide and the home was out of their budget. Instead, a buyer turned up and the home sold.
Another agent said a lacklustre campaign gained momentum once the reserve price was published.
Since October 16, all properties for sale by auction or fixed-date sale in Victoria must have the vendor’s reserve price published seven days in advance.
The new laws are aimed at tackling property underquoting and follow this masthead’s Bidding Blind investigation, which uncovered widespread deception facing those trying to navigate the auction market.
It is early days to judge the results of the changes. Some agents found teething troubles, but others offered positive feedback.
A local upsizer paid $1.29 million for an architecturally renovated North Melbourne home at 6 Harris Street – a contemporary home with distinctive atrium, gourmet kitchen and lush courtyard.
At first the home had a quoted price range of $1.3 million to $1.4 million. After a few weeks, buyer feedback was at the lower end of the range. Under the old system, the price range would have likely still been in place on auction day, and the reserve would have been set on the day.
“A lot of buyers would look at a quote range and think the vendor’s reserve is going to be at the top of the range,” Nelson Alexander Carlton selling agent Peter Varellas said.
In fact, the Harris Street vendor set a reserve of $1.3 million and a genuine buyer turned up. The home sold in post-auction negotiations for $1.29 million, $10,000 shy of the reserve price and a result the seller was “quite happy with”.
“I found with my auctions displaying the reserve price has helped,” Varellas said, although he added it was too early to form an overall view on the effect of the change.
Hodges McGrath Sandringham selling agent Greg Downes handled the sale of a house in Black Rock with a reserve of $2,175,000. There were four bidders and the home at 28 Arranmore Avenue sold for $2,283,000.
“In my view, publishing the reserve well in advance had a significant positive impact on the campaign. What had initially been a relatively lacklustre campaign gained considerable momentum following the publication of the reserve,” he said.
“I believe publishing the reserve provided greater transparency around the overall process and, importantly, gave prospective buyers greater confidence to participate.”
Jellis Craig Fitzroy agent and auctioneer Charles Atkins agreed the new legislation brought more transparency to the marketplace, and thought it had helped to bring bidders out to sell a mid-century apartment he was auctioning in Princes Hill.
“But it’s probably a little too early to tell the overall impact it’s going to have on clearance rates,” he said.
There were fewer auctions than usual, with only 466 scheduled for Saturday compared with 698 the previous Saturday. Next Saturday, 853 auctions are scheduled so far, suggesting some vendors held off a week.
Real Estate Institute of Victoria chief executive Toby Balazs noted that the auction clearance rate was low last week, at 53 per cent on Domain figures, albeit in the context of a challenging market.
“There was some feedback around buyers not understanding that a vendor on auction day, if the property hadn’t met the reserve, that they would still have the flexibility at that time to lower their reserve to try and meet the market,” he said.
Lewin Real Estate Kingston/Bayside selling agent Brian Lewin, who auctioned a four-bedroom house in Cheltenham, said many buyers did not understand the rules.
“It does not mean the vendor will not sell less than the reserve price,” he said.
“Our reserve was $1.35 million but we sold it at $1.3 million. So it is very important to get your buyers to come to the auction.”
Other agents had more positive feedback from buyers than from vendors.
Barry Plant Essendon’s Paul Filippone sold 427 Victoria Street, West Melbourne, above its $1.06 million reserve, for $1,115,000.
“A couple of people said there’s no games being played,” he said. “It gives buyers the confidence to know if they are in the race.”
He said advertising a reserve seven days prior could be challenging for vendors. His listing had four vendors, a family that inherited the home, who needed to agree early.
Buxton Sandringham’s Richard Slade sold a Hampton house for its listed $1.85 million reserve in post-auction negotiations.
He thought listed reserves gave buyers more transparency, and believed picking the right reserve could drive interest.
“But if [vendors] have got unrealistic expectations from day one, and they know that they’re going to be a little bit ambitious, then they might just move away from the auction as a process.”
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