Agents will soon have to publish vendor reserve prices ahead of auctions and fixed-date sales, and disclose final prices, in a massive industry shakeup. This is what you need to know.
From 1 October, Victorian agents will be required to publish vendor reserve prices at least seven days ahead of auctions and fixed-date sales, and disclose final sale prices within seven days.
Under the new auction requirements, agents must ensure that all marketing and advertising material is updated with the reserve price.
According to Barry Plant chief auctioneer James Hatzimoisis, the changes will alter the way buyers and agents interact, while vendors will need to rethink their pricing strategy to reflect the market.
He also rejected the idea that the measures will significantly change buyer competition, as long as agents continue to help sellers price properties in line with market conditions.
“It’s about educating both sellers and buyers about how the new legislation’s going to be working,” he told REB.
Here’s what property professionals need to know:
When do the changes take effect?
On 1 October, the legislation will officially commence, but a 14-day transition buffer will apply to active real estate campaigns for auctions and fixed-date sales for the price disclosure rules.
From 16 October, no auctions or fixed-date sales can legally proceed unless the reserve price has been publicly disclosed for seven consecutive days prior.
In addition to the new disclosure rules, from 1 October, every property must also have a Property Price Statement (PPS) on all advertising, to replace the old Statement of Information (SOI).
This will need to include comparable sales, which are already required, as well as details such as building type, bedroom count, bathroom count, car spaces, internal floor area, and land size.
When fewer than three comparable properties are available, the PPS must contain an explanation for this.
Agents will also be required to update the PPS with the final sale price within seven days of the sale becoming unconditional, and make it publicly available for 18 months.
Administration burden
As a result of having to ensure that all advertising reflected the reserve price, and to watch out for additional deadlines, Hatzimoisis also said agents were likely to face added workflow burdens.
“The reality is that this does increase the paperwork trail and the amount of administrative work, because we want to ensure that we’ve got a documented trail on everything that we do,” he said.
Hatzimoisis said that Consumer Affairs Victoria had made it very clear what needed to be done, and it was essential for real estate networks to pass on all information to their franchises to be prepared.
“The paper trail is going to be a little bit more in depth. So we have to ensure that our offices’ processes are updated and are in place to align with all the new requirements,” he said.
Buyer competition
When it came to industry concerns that the new rules will drastically affect buyer turnout at auctions, Hatzimoisis said the impact was yet to be seen.
He said that buyers’ willingness to bid for the property may ultimately depend on market conditions and buyer sentiment.
“Overall, I feel in any market conditions, if a property is presented well, priced reasonably, it’ll generate activity.”
Hatzimoisis added that disclosing the reserve price was unlikely to reduce competition if it was informed by data and in line with comparable sales.
“It’s all about the perception of value … there’s a lot more things that have to be considered other than just price,” he said.
The ‘death’ of the auction
Additionally, industry bodies like the Real Estate Institute of Victoria (REIV) have raised concern that the new rules will drive sellers away from the auction process in favour of private sales.
Hatzimoisis said the industry’s initial fears that the “auction system’s dead and buried" were unlikely to be true.
“If the property is suited to an auction campaign, I can’t see any reason why they wouldn’t want to do it because not every property is suited to an auction campaign,” he said.
He said that while some vendors may be hesitant about disclosing the reserve price, it was the role of the agent to inform them about the best way to sell the particular property.
“Agents are going to stick to their existing processes. They may get some initial feedback by having a few inspections, and if they feel that it’s best suited to an auction campaign, they’ll suggest it,” he said.
Price disclosure after sale
Hatzimoisis said that while disclosing prices after the sale would boost transparency in the industry, there may be possible issues where buyers or sellers do not want to make it public.
He said that these included those experiencing domestic violence, or caught up in legal or financial issues.
“They may not want to disclose the price and could obtain grounds to seek an exemption for the price to be not disclosed,” he said.
“Other than that, the more information we can provide to the public, and the more transparent we are with pricing, the better it is.”
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