Buyers may be able to figure out reserve prices at auction in South Australia if new legislation is passed by the state government.
The changes will force reserve prices to be within 10 per cent of the property's initial marketing/listing price. The state governemnt claimed the proposed laws would make the auction process more transparent for buyers.
"Currently, under the Land and Business (Sale and Conveyancing) Act, the reserve is not regulated and there is no nexus between the reserve and the marketing of a property," acting consumers minister Patrick Conlon told Adelaide Now.
Adelaide-based independent auctioneer Brett Roenfeldt told Real Estate Business the propsoed law "is ridiculous".
"What they are doing is disadvantaging every vendor in the market because you take a property to auction to gauge what the market perceives to be its value," he said.
"You test the market, and if you find more demand in the property than anticipated, this could seriously damage the vendor’s ability to get maximum price on the property because serious bidders will be reluctant to go much higher than the reserve they have figured out."
Although the proposal may increase the transparency of the transaction, auctioneer and principal at Harcourts Platinum in Toorak SA, Nick Baranikow, agreed sellers would suffer.
“The more government regulations there are, the more difficult it will be for everyone at the end of the day,” he told Real Estate Business.
“The whole idea of an auction is to let market competition dictate the current price, so the more regulations you bring in to hamper that, it becomes an artificial mechanism. The vendors will raise the initial price benchmark to give the room to adjust the reserve if they need to.
“I tend to agree with commentary made by other agents and other industry figures that the legislation is already in place to look after both sides of the transaction.
“The government seems to be forgetting the right of the vendor with these changes. The limitation to where the reserve price is set is going beyond what is necessary,” Mr Baranikow added.
“The government reasoning is to eliminate the minority of agents who might try to doctor the result. The legislation is already in place to have that addressed, so you have to ask; why is this being added in?”