Graeme Pollock was on board when his agent suggested advertising the reserve price before the auction of his Gladstone Park house, keeping in mind his daughter Kate Adams’s own disappointment in the property market.
Pollock is among the first vendors who experimented early with Victoria’s new reserve disclosure rule. He felt advertising the reserve was the fairest way to run the October 3 auction for the investment property, although he was under no obligation.
From October 16, it’s mandatory in Victoria to advertise the reserve at least seven days before an auction or fixed-date sale.
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.
This year, Pollock and his wife Linda watched their daughter and her partner endure frustration while trying to buy a home. “They spent a bunch of money doing building inspections, and were told by the estate agent that they were in the game based on the quoted range, only to be the only bidder at the auction and find that they were nowhere near,” he says.
“We’re talking more than $100,000 off the mark. And so we thought, ‘Well, we’ve been on the other side of this’.”
They offered 25 The Circuit through Phillip Mercieca from Ray White Gladstone Park, with a reserve of $700,000. Four bidders pushed the sale price to $801,000.
Pollock says they were “gobsmacked” by the result, but believes the reasonable price encouraged competition. “As a vendor, if you have some empathy with the buyers, then that can sometimes act in your favour,” he says.
Publishing the reserve before the auction of 16 Ladd Street in Watsonia was a first for Jellis Craig Greensborough and Hurstbridge agent Daniel Cobern, and paid off in one bid. The first bid matched the $1 million reserve, and the classic 1960s house sold for $1,090,000.
Cobern and his vendors Kay and Andrew, who requested their surnames be withheld for privacy reasons, did this in October last year, initially with a $920,000 reserve, which was upped to $1 million after an offer.
Cobern has since successfully sold several homes with advertised reserves. He says from now on, agents will have to establish their vendors’ expectations early on. “You no longer can leave it on auction day to know where that price is,” he says.
Ray White Ferntree Gully agent Jack Rickard recommended his Rowville vendors, Sandy and Dave, who requested their surnames be withheld for privacy reasons, reveal their $1,325,000 reserve before auction on September 12.
Dave says they were nervous at first about a method that the agents hadn’t used before. “We took the time to examine it and I asked, ‘Tell me why this might be the right strategy to help us get what we want?’” he says. “And as we discussed it, it made sense to me that that was the right thing to do.”
Rickard says two prospective buyers were deterred, but it revealed who was committed. Three bidders took part and the four-bedroom house sold for $1,336,000.
“If anything, it helps because your buyers know that you’re not playing games,” Rickard says.
“We lost two bidders in theory, but they weren’t necessarily going to be the best buyers to work with, and they might have felt like they were wasting their time. So both parties get what they want, which is transparency.”
Macedon Ranges agent John Keating of Keatings Real Estate has been lobbying for greater transparency since the mid-1980s. He’s published reserves for more than 20 years, arguing it prevents underquoting.
“Regarding market values, there will be no change,” he says. “The market will not be harmed by the publication of reserve prices.
“When agents get their heads around the benefits for both purchasers and vendors, I am very confident that the transparency of the auction process will be the catalyst to many more sales being made by the auction selling method.”
Opponents worry more vendors will choose private sales, taking their price hopes behind closed doors.
Real Estate Institute of Victoria chief executive Toby Balazs says time will tell. “The challenge will be whether agents in conversation with their clients believe a better approach might be private sale to ensure they get the best price for their property, which is absolutely their right.”
Balazs says the REIV backed the law’s transparency aims, but opposed the requirement to publish a reserve seven days before auction and limit vendors’ flexibility.
He says the first agents to adapt have shown resilience. “The industry has had regular change and regulatory reform thrown at it for years now … so it’s no surprise to me that this very resilient industry has said, ‘OK, we’re getting on with it and we’ll do what needs to be done’,” Balazs says.
“That doesn’t mean that necessarily the legislation or the regulation are fair or going to create a better environment.”
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