Bringing down the hammer on dodgy price guides
Properties being sold by auction should be advertised with the reserve price to stamp out misleading price guides.
With auctions becoming the sales method of choice, particularly in Sydney and Melbourne, the process must be improved to provide greater transparency for buyers.
Vendors who choose to sell via auction should be required to publish the auction reserve price seven days out from auction day to create a more transparent process.
Buyers can then pay the building and pest inspection costs and legal fees with confidence knowing that they have a real chance of owning the property rather than wasting money trying to buy a property that they could never afford if their budget is below the vendor’s reserve.
Despite it being a breach of the Act, many selling agents and vendors still under-quote the value of properties up for auction and something needs to change.
As expected, buyers accept the selling agent’s price guides on face value for properties listed for auction and why wouldn’t they?
Unfortunately though for the buyers, the vendor’s real expectations and subsequent reserve are often significantly above the price guide and often far more than they can afford.
For example an auction I attended for a client last Saturday had an advertised price guide of over $1.5 million up until the day of the auction.
The auction bidding stalled at $1.970 million, some 30% above the guide and the auctioneer then stopped the auction and asked the agent to seek the vendor’s instructions before eventually selling the property to that bidder.
I can assure you the mood at the auction turned to one of frustration and anger for many buyers holding bidding cards as surely the reserve should have been met that far above a price guide.
Unfortunately this happens every weekend leaving thousands of people unnecessarily out of pocket.
While the Queensland government’s proposed approach has some merit in removing bait advertising it doesn’t address the issue of buyers wasting time and money on inspections in situations where vendors set unrealistically high reserves.
Patrick Bright is the founder of Sydney-based buyer’s agency EPS Property Search.
