So you like the auction process - think again!
Geoff Grover - Mount Coolum Real Estate
Coolum Beach Property
So you like the auction process?
Reserve prices scrutinised
Date - November 20, 2012 – Domain/com.au
Carolyn Boyd is a property journalist and keen follower of Australia’s housing market.
The auction season might have only a few weeks to go before winding up for Christmas but there has been plenty of attention on the process – and in particular the issue of price guides – in the last week.
Following a blitz in NSW, which involved Fair Trading officers in that state turning up to real estate businesses unannounced and attending 20 weekend auctions, up to five agents remain under investigation for breaches to the fair trading requirements of the Property Stock and Business Agents Act 2002.
The investigators were targeting illegal practices such as deliberately under-quoting to potential buyers, over-pricing to vendors and dummy bidding.
News of whether the agents will be fined or issued with a warning was not available at the time of writing.
In South Australia reserve prices at auctions are set to become more transparent if the Weatherill government gets its way.
Last week, South Australia's deputy premier John Rau introduced a bill that will make it against the law for properties to be passed in at a higher price than the reserve, which must be set at no more than 110 per cent of the price acceptable to the vendor, as listed on the contract between the agent and vendor.
That means the vendor will be forced to decide before the property's marketing campaign kicks off just what price they are willing to accept, and stick with it.
While potential buyers won't be privy to a vendor and agent's sales agreement, any mention of a price on marketing materials will give away the reserve price, as the reserve must also be no more than 10 per cent higher than the advertised price.
In announcing the bill, Mr Rau argued "bait pricing" is used by some real estate agents to "unfairly suck in prospective home buyers".
"I have received numerous complaints from homebuyers highlighting the practice of bait pricing," he said. "These laws will stamp out bait pricing and give home buyers an even playing field."
"The government believes that the most effective way of eliminating the practice of bait pricing is to create a nexus between the price sought by, or acceptable to, the vendor and marketing a property based on that price.
"The expectations of the purchaser will be realistically met when the auction of a property is based on advertising that reflects the genuine selling price of the vendor."
Mr Rau rejected the notion that the laws would be unfair to home sellers.
However, the Real Estate Industry of South Australia's general manager of communications Emma Slape argues the changes will disadvantage vendors and scare homeowners away from holding auctions.
"If they have put down that they will accept $500,000 on the day of listing the property, and they've had really strong demand for the property, and they're thinking perhaps we would be able to get $600,000 they won't be able to do that under the laws," Ms Slape says. "They're limited to making that reserve no higher than $550,000 [for example].
"You need two parties to negotiate and we feel that one party is getting their hands tied behind their backs."
Coolum Beach Property