States may adopt controversial auction reforms

NSW and Victoria may be next in line to adopt controversial auction reforms currently being pushed by the Queensland government, unless the industry comes up with some credible alternatives.

In an attempt to stamp out underquoting, the Queensland government is planning to ban price guides at auction, which many commentators believe will damage the auction process.

And according to director of EPS Property Search Patrick Bright, NSW and Victoria will adopt the same laws soon after Queensland.

“The Queensland solution is going to work, but it’s going to kill off the auction process as well as underquoting,” he told Real Estate Business.

“When it works, NSW and Victoria Fair Trading is going to see that and there’s a good chance they will adopt it too.

“If NSW adopts the Queensland model, which is likely, it will kill the auction system. If the industry doesn’t come up with some credible alternatives, the government will make the changes for them.”

Earlier this week, John McGrath told Fairfax that up to 15 per cent of agents are actively underquoting to attract numbers to auctions. However, he remains a staunch opponent to the Queensland state government’s solution of banning price guides.

As a former sales agent and auctioneer, Mr Bright believes the time for denying there is an underquoting issue has passed.

“The mistake was the industry said ‘Don’t do it; there’s nothing wrong with the system, there’s nothing to fix’ – which I believe was not a clever position to take," he said.

“The government had made a decision there was a problem and they were going to fix it. So instead of arguing there’s nothing wrong, the industry missed an opportunity to come up with a better solution.”

A potential alternative is revealing the reserve price to bidders, says Mr Bright, who has created an online petition to put the idea before the NSW state government.

“The system is not balanced or fair," he said. "I think the auction system is very transparent once the property is on the market and we’ve reached reserve. But up until that point, there’s not a lot of transparency.

“If we don’t come up with a solution, they’re going to make one for us – and that’s what they’ve done in Queensland.”

Another alternative is a similar system to the South Australian auction process, which president of the Real Estate Institute of South Australia (REISA) Ted Piteo admits he’s a fan of.

“If an agent believes a property is worth $450,000, but the owner wants $500,000, that’s fine but the advertised price has to be the higher of the two, so $500,000 – and the reserve cannot be set any higher than 10 per cent above that," he said.

“Some auctioneers will disagree with me, but I’m a fan of our system – although I have to say it has its flaws still.

“If the vendor wants a quick sale and is happy with less than market value, then it must still be advertised at the higher of the two. If they’re happy with $450,000, but comparable sales say it’s worth $500,000, then the agent must advertise at $500,000, or else they could face fines.”

While he admits it’s not a solution, Mr Piteo still believes it’s a better alternative to either abolishing price guides or revealing reserves.

“What’s the point of revealing the reserve? For both parties, there are no winners. If your vendor is a little unrealistic in trying to achieve as much as they possibly can and it knocks out genuine buyers, what’s the point?

“Art, machinery, antique auctions have never been asked to reveal reserves. Why? Because the seller wants the best price they can achieve,” he said.

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