Letter from the editor: More information not less please Queensland
A lack of information in our industry is what causes some of the worst scandals. Often when we see a spruiker exposed for ripping people off, or taking undisclosed kickbacks, or in some other way running afoul, they've been doing it for a long time and many people have known about it.
When it comes to property, as with most things in life, the more information the better.
At the moment, we have Queensland potentially legislating against auction price guides - a detail that is heavily used and relied upon by buyers across Australia. It's also a number open to some hefty toying with - see underquoting and related arguments - which is why they may consider it better for consumers to do away with this number completely.
But herein lies the issue. Some information is better than other information, some statistics are inherently more useful, more specific, more valuable and more accurate. For property investors, novice buyers and everyone on the property spectrum, the challenge is being able to identify the good data versus the "not so reliable" data when it arises.
Last week, I had industry members from Sydney, Melbourne and Queensland cite to me that the statistics on underquoting around auction price guides can be anywhere from "a few of them" to "98% of agents" in their experience. It appears very few can agree whether or not it is a widespread practice, perhaps due to the difference in laws around underquoting across the states and territories.
So let us put this plainly.
If a vendor tells an agent they want $1.2 million and that's what is expected, this is what they put on the agency agreement. If it's advertised with a $1.2 million price guide and the auction just goes crazy and reaches $1.8 million - that's not misleading necessarily. If a vendor tells an agent they want $1.8 million and that's expected, this is what they put on the agency agreement and it's advertised with a $1.2 million price guide - that is misleading. It would be bizarre for an agent to put $1.2 million on any agreement if, and those that are good at their job can guess to almost the $1,000 what a property will go for, they know it will go for a substantially different price.
I have seen instances, and heard of many others, where the reserve is higher than the price guide. I suggest alerting us here with the details. But remember, the reserve price is usually set on the day or close to it. We all know how emotional this part of the process can be for both vendors and buyers. If there's a last minute surge in interest, or the vendor changes their mind, they could easily put the reserve higher than they'd previously indicated to the agent. This doesn't mean the real estate agent has done the wrong thing. The piece of paper that proves the underquoting remains the agency agreement - although you could make a good argument for the reserve price being indicative of whether there may be underquoting.
Grey areas can occur when you have unusual properties, infrequent sales or when the market is just going off (and in this last instance, some predictive measures should be able to be used). Of course, it's largely these types of properties where auctions are used to best effect and are therefore most popular.
Rather than decreasing information provided, it's worth a suggestion that either more information is given - such as the dollar figure put on the agency agreement - or more policing of underquoting takes place. This would require an effort, but a higher level of regular enforcement and presence, such as turning up at auctions and checking agency agreements, would quickly stamp out many of these issues. It would also shine the light onto the practice and reveal whether it is as "widespread" as expected by some. There is a huge role for the authorities here, and I look forward to seeing them take action in the future.
What is also worrying about the changes to the Queensland legislation, which has been touched on by a number of news outlets and the Change petition from News Limited's real estate editor Kylie Davis, is the penalty provided to real estate agents should they tell journalists a price guide on a property. Property media is a significant part of the Australian landscape and our real estate industry. There's already plenty we can't say as journalists without facing defamation lawsuits which, even if you win, can cost you dearly in the process. The one thing we'd hate to lose is the ability to comment on these prices or for our sources to be fined for providing information to us. Without price guides we head in blind, not knowing the dollar figure significance of an auction and left to 'guesswork'. Record-breaking auctions in Queensland may miss out on coverage - sometimes the price guide is enough to prompt a reporter to turn up.
The fact remains, however, that this is largely about how it will affect buyers and vendors and less to do with the reporters. A disconnect between the Real Estate Institutes recently appeared about this issue and I was struck by the comments from the CEO of the REIQ, Anton Kardash where he said that auctions are not unique to real estate.
"Art, horses and motor vehicles, to name but a few, are regularly auctioned without a fixed price or a price guide because that is the very nature of auctions. The market will decide on the day of auction what it is prepared to pay for that particular asset," Kardash said.
But property, as no doubt many will agree, is not an artwork (although it can be), or a horse or a motor vehicle. Even those who buy mainly to invest will be forced to concede that for many this is their home and their life savings and we all deserve more from our industry than to treat property as solely another commodity.
He explains that not presenting a price guide is already the 'norm' in Queensland - and certainly it makes sense to legislate to ensure everyone is on the same page. But he also said this: "It should also be highlighted that if a seller wishes to market a property with a price or using a price guide, they may do so by instructing their agent to sell via the much more popular private treaty method."
Vendors should be able to sell their property with as much accurate information as they'd like to provide. If they want to include a building and pest inspection, a valuation and some rental appraisals into the mix, they should be able to. Why should they be unable to guide on price as well?
Kardash also points to the complaints being "rife" in other states regarding price guides for auctions. Considering New South Wales and Victoria are the two states with the biggest auction cultures, it would be a safe bet to assume he is pointing to Melbourne and Sydney as the perpetrators. I know many real estate agents in both of these capitals and a huge number of them are upright individuals that I would be shocked to see knowingly involved in any misleading behaviour. While I can't deny that there are some of the other side of the fence, why should we restrict those who take to their role with professionalism?
When it comes to property, as with most things in life, the more information the better. Our readers have been clear in a number of Property Observer polls, emails and comments that they'd like to see reserve prices published as an option if price guides are not available. Let's make the information provided more accurate, rather than looking to decrease that we already have.
Disclosure: Jennifer Duke has signed the Change petition against the Queensland auction price guide ban
