Should auction reserve prices be published?
When preparing for auction, serious buyers will be doing their best to ascertain just how much the property is going to sell for and the amount of interest it might receive. However, with reserve prices not necessarily advertised, it can be tricky to get a gauge on where the floor of the price might be.
This is the argument from buyer's agent Patrick Bright, director of EPS Property Search. In order to stamp out misleading price guides and to increase transparency, he argues that reserve prices should be published.
“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,” said Bright.
“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.”
Underquoting, a topic that has been a subject of debate on Property Observer many times prompting our experts to warn buyers to take the price guide with a "grain of salt", does still exist in the marketplace, he said, and publishing the reserve may have the potential to reduce this.
Buyers regularly accept the selling agent's price guide on face value, he said.
“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."
He describes an auction that recently occurred where the advertised price guide was 'over $1.5 million' up until the last day. The auction bidding stopped at around $1.97 million, when the agent went to seek out whether the property was on the market.
“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," he said.
“Unfortunately this happens every weekend leaving thousands of people unnecessarily out of pocket.”
This comes as the Queensland government is looking to ban advertised price guides to help reduce 'bait pricing'. This is being said to be prompting 'dark days' for the real estate industry in Queensland.
