Reserve Price

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Discussing the issue of the potential price guidance ban in Queensland, the Real Estate Institute of New South Wales president Malcolm Gunning expressed his support for a recent petition for agents to publish reserve prices a week out from auction.
The <a href="/expert-insights/buying/29808-christopher-bright-media-outlets-ignoring-underquoting-petition" target="_blank">petition, from EPS Property Search's Patrick Bright</a>, looks to increase transparency by requiring real estate agents to publish the reserve prices to the public.
Gunning told Property Observer that he doesn't support the banning of price guides in Queensland, believing that they're "trying to exonerate the responsibility of under or over quoting". Just today, Property Observer reported that the Real Estate Buyers Association of Australia believe that <a href="/expert-insights/buying/30778-coercion-will-be-rife-under-new-queensland-price-guide-laws-rebaa" target="_blank">coercion will be rife if the changes go through</a>.
With Brisbane labelled one of the upcoming investment hotspots, he also expressed concern for buyers in New South Wales and other states and territories who would be heading to the south-east Queensland suburbs for purchasing, unaware of what prices could be attained, where a local might be more familiar.
"In NSW, the institute uspports the agent giving an indication. Agents are dumb when they [underquote]and have no confidence in their ability," said Gunning.
In fact, he pointed to education being the real issue for New South Wales instances of underquoting.
"We think the problem is that in New South Wales the level of entry into real estate is the lowest in Australia and we think that [when agents underquote it is] reflective of agents not being confident in themselves."
He noted that in the last 18 months it has been difficult for agents, particularly those with little confidence in appraising a property, to provide an accurate price guide, with buyers getting desperate to purchase and chasing the properties beyond market expectations.
However, he said, the agent should be able to give a purchaser an indication of the vendors expectation, and perhaps mention the level of competition. If a buyer wants to compete at auction with other bidders, then this is their decision, however they should not be competing with a reserve price set higher than expectation.
Gunning expressed his support of John McGrath, who has been actively against removing the price guidance.
Despite the opposition, however, it might go through.
"The REIQ are supporting it, and they’re a strong organisation, so I think the government might pass it," he said.
He also told Property Observer that he has recently spoken with the Office of Fair Trading who have said that underquoting is not as high on their agenda as looking to knock out dodgy Registered Training Organisations.
"There are a lot of training organisations offering sub-standard training, we’re trying to lift the standard of the industry. We’re getting people coming in with just a week of training," he said.
He noted that the better agents who do not fall into underquoting tend to be those with higher levels of education.
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REINSW's Malcolm Gunning supports early publishing of reserve prices

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Underquoting is a hugely tricky topic for many in property, with the “quote [or price] it low, watch it go” mantra said to be the modus operandi of many in the real estate selling business, especially when it comes to auction sales.
Recently, <a href="/news/29454-online-petition-for-mandatory-reserve-price-publishing-launched" target="_blank">EPS Property Search’s Patrick Bright began a petition against underquoting</a>, and encouraging the consideration of early publishing of the reserve price for properties heading to auction. Property Observer covered this petition upon its launch, and <a href="/news/29129-should-reserve-prices-be-published-for-auctions" target="_blank">discussed it with him prior to its inception</a>.
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SQM Research’s Louis Christopher has also expressed his dislike of the practice of underquoting and is vocally backing Bright’s petition.
</blockquote>
Property Observer recently attended an auction in Sydney where <a href="finding/29729-agent-underquoting-will-not-always-help-buyers-get-the-price-they-want" target="_blank">there was around a $200,000 discrepancy between reserve price and the price guide</a> provided by the real estate agent. The property sold at auction just above the reserve, and we have clear reason to believe that the vendors would never have considered an offer around the price guide provided. Certainly, there may have been buyers that were unable to afford this price and that may have spent money on inspections and conveyancing to prepare for the auction, let alone time. As a buyer's agent, Bright says that this is all too common and that he sees underquoting at the majority of auctions he attends.
SQM Research’s Louis Christopher has also expressed his dislike of the practice of underquoting and is vocally backing Bright’s petition.
"I am personally sick to death of underquoting in real estate.  It wastes time, money and breaks people’s hearts once they know they have been deceived. Ultimately it is damaging to the property sector and all those who participate in it,” said Christopher in his recent newsletter.
"One thing Patrick and I share in common is that we have a very strong belief in property market transparency and ensuring people don’t get ripped off in property transactions. Recently, Patrick has gone so far as to get a petition going to make it compulsory to advertise auction reserve prices to stamp out underquoting and dummy bidding,” he said, noting he 100% agrees with the objective, urging others to <a href="https://www.change.org/petitions/the-honourable-stuart-ayres-mp-nsw-government-make-it-compulsory-to-advertise-auction-reserve-prices-to-stamp-out-underquoting-and-dummy-bidding%20%20" target="_blank">sign the petition</a>.
However, Christopher also expressed his dislike at media ignoring the petition.
"Sadly, I can tell you now there are some dark forces out there who don’t want to see this happen. Indeed, Patrick has recently told me of some media outlets who won’t give this petition coverage, even after promises they would! No doubt they are worried they may lose advertising dollars due to these dark forces,” he wrote.
He said he had a message for those outlets: "Please show a bit of spine on this issue and give it the coverage it deserves.”
He told Property Observer that despite the pain some interests may feel in the short term, price transparency will create overall benefits across the market, and it should be given a run and prominence.
Recently, mainstream media outlets went gangbusters writing about Queensland’s potential change to ban price guides from auctions – something<a href="/news/qld/29009-queensland-auction-price-guide-ban-defies-common-sense-john-mcgrath" target="_blank"> Property Observer also wrote about</a> – and he noted that it is startling to see the contrast between some experts’ exposure and others.
"[Underquoting] does come out in a rising market,” Christopher explained. “Markets can move quickly, but what Patrick has put forward is that the reserve price isn’t provided until a week out.”
Discussing the Queensland potential price guide ban, he noted that he sat on the fence, saying there were many pros and cons. However, he noted that no guide is better than a phoney guide.
<blockquote>
"They’re big businesses protecting their bottom line, and it’s completely their right to do that,” Bright said.
</blockquote>
While neither would disclose which media outlets said they would cover the petition and since changed their minds, Property Observer notes that online there have been stories from Australian Property Investor magazine. Patrick Bright confirmed that API had been in support of sharing news of the petition.
Bright said that he doesn’t want to criticise individuals as he is sure there are powers above them calling the shots.
"They’re big businesses protecting their bottom line, and it’s completely their right to do that,” he said.
He also said that he is getting a lot of support when he personally speaks to sales agents, but finds that many are concerned of ridicule from their peers if they support the petition.
Disclosure: Jennifer Duke has signed the petition for reserve prices to be published, as well as <a href="/news/qld/29277-queensland-auction-price-guides-the-more-info-the-better" target="_blank">a petition opposing the Queensland price guide ban</a>.
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Louis Christopher and Patrick Bright say media outlets are ignoring underquoting petition

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A Bexley vendor and their estate agent have publicised their reserve price ahead of its 19 July auction.
The unusual tactic has already garnered a boost for its marketing with a feature in yesterday's Daily Telegraph, and featured on a Channel 10 news report by Daniel Sutton.
Their web marketing doesn't actually give the reserve price, so presumably inspectees of 15A St Georges Road have been advised of it when they turn up or ring the agent.
The LJ Hooker listing agent confirmed to Property Observer that there was no marketing of the reserve price as he needed to engage possible buyers in a conversation which might not happen if the reserve price was publicly available.
Which highlights the concern of disclosed reserves in the lead up to any auction. 
<a href="https://www.realestate.com.au/property-house-nsw-bexley-117327823" target="_blank">There is a $570,000 disclosed reserve price for the two bedroom, two bathroom property</a> which traded at $400,000 in 2004.
My view is that disclosed reserves are worthy for run of the mill property, but likely to work against any vendor with a property tapping emotional purchase aspirations.
I am a bigger supporter of price guidance, as long as vendors and buyers are being told the same figure.
The last survey reported by Property Observer on the gap between real estate agent price guides and actual auction results in Sydney sat at 12%, according to an August 2013 survey by Intelligent Property Services.
In 2012 there was an 9% variation and in 2011 an 8% variation.
Head of research at Intelligent Property Services, Joe Kotevich, suggested the surge came more as a result of buyer demand than any deliberate lowballing by agents.  
Intelligent Property Services obtains the price guides after the first week of showing the property, allowing time adjustment of expectations. The auctions are monitored following inquiry from its buyers agent department.
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jchancellor-FAypfDUnLy

Bexley pre-auction reserve disclosure the one swallow before spring

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GUEST OBSERVATION
On Saturday, I witnessed two auctions that were marketed in two different ways and which resulted in very different outcomes.
The first property was advertised with a fairly typical auction marketing campaign which included the usual underquoting. The price guide that was provided throughout the marketing campaign was $1,050,000. At auction the bidding ran out of steam short of the reserve. The agent came and told me he needed more money to get it on the market as the reserve was $1.25 million. I said, "best of luck as you won't be getting that out of me".  
Frustrated the agent went inside to talk to the vendor again before coming back outside to tell me that he had convinced the vendor to reduce the reserve to $1,225,000.  He then told the auctioneer and it was called on the market at $1,225,000. No further bids were made and it sold for $25,000 under the vendor’s reserve to us.  
Anyone who did detailed research and looked at the comparables would know that the property was worth $1,250,000 to $1,275,000 but the underquoting attracted people with a budget closer to the guide of $1.05 million rather than those with a budget of $1.25 million or more. More than likely many of those people with a budget around the $1.25 million mark were attending auctions that had price guides around that point but reserves and values that were maybe closer to the $1.45 million mark?   
The fact is my clients loved the property so much that they gave me a budget of $1,330,000 to spend if needed to secure the property. Yes we purchased the property $105,000 below what my clients were prepared to pay for it which they are very happy about. However they are even happier we purchased it for $50,000 below what the comparables indicated the property was worth up to. 
In comparison at the second property auction I attended the vendor had decided to be transparent with the market. Whether he decided to do this of his own accord or read about my petition to make it mandatory to publish reserves and decided to take the idea on board, I don’t know.  What I do know is that he was transparent with buyers and attracted bidders who could actually afford the price he wanted for the property. He set and published his reserve at $570,000 and <a href="/expert-insights/buying/33615-a-7-5-premium-above-disclosed-reserve-at-bexley-auction-experiment" target="_blank">the property sold for $613,000, some $43,000 over the reserve</a>.
The buyer was ushered into the house to sign the contract and so I spoke to the under bidder. I asked her if the publishing of the reserve price influenced her decision to bid on the property.  She said she would not have even attended the auction if the reserve price had not been disclosed as she was ‘fed up’ with attending auctions that had reserves set well over the price guide provided by agents.
The bottom line here is that transparency won the day.
Let’s hope it catches on for not only all the vendors’ sake but for all the buyers who keep wasting money and time attending auctions every week where the reserve is set in excess of the guide when in fact they should be one in the same.  
If you think my idea of publishing reserves prior to auction is a good move then simply <a href="https://www.change.org/en-AU/petitions/the-honourable-matthew-mason-cox-mlc-nsw-government-make-it-compulsory-to-advertise-auction-reserve-prices-to-stamp-out-underquoting-and-dummy-bidding" target="_blank">sign my petition</a> which is calling on the NSW state government to make it mandatory for all property auctions to have the reserve price advertised seven days ahead of a scheduled auction. 
Feel free to make your comments as to why you signed the petition in the comments box.
Patrick Bright is the founder of Sydney-based buyer’s agency <a href="https://%20www.epspropertysearch.com.au/" target="_blank" rel="nofollow">EPS Property Search</a>.
Patrick is the author of four best-selling real estate books known as “The Insider’s Guide to Buying Real Estate Series”.
<a href="https://www.change.org/en-AU/petitions/the-honourable-matthew-mason-cox-mlc-nsw-government-make-it-compulsory-to-advertise-auction-reserve-prices-to-stamp-out-underquoting-and-dummy-bidding" target="_blank">Visit change.org to sign the petition</a> calling on the NSW state government to make it mandatory for all property auctions.
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No more excuses: Publishing the reserve price prior to auction works

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A McCrae beach box fetched a local record of $239,000 at weekend auction.
It was bought by a racehorse owner who was track side at Derby Day.
The 20 square metre <a href="https://www.realestateview.com.au/Real-Estate/boatshed-28-rosebud-foreshore-mccrae/Property-Details-buy-residential-9584706" target="_blank">bathing box 28 on the McCrae beach foreshore</a> sold at about $40,000 over reserve. 
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<div><img src="https://resources2.news.com.au/images/2015/10/31/1227589/252002-c957b2d0-7f7c-11e5-a5c8-de3ffc01720c.jpg" alt="A Melbourne racing identity snapped up the sought after property." width="650" height="366"></div>
Selling agent Craig Bennie of Ray White Rosebud said four bidders competed for the offering which was last offered around four decades ago.
The agent said the last beach box he had sold on McCrae beach fetched $75,000 five years ago. Others had been listed at $100,000 plus last summer.
Box 28 was among the 600 offerings scheduled to go under the hammer over the weekend, making it the biggest pre-Melbourne Cup weekend ever, according to the REIV.
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McCrae beach box fetches $239,000

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The RBA board member John Edwards, a former chief economist for HSBC and adviser to former prime minister Paul Keating, has not been given a second five year term.
He will be replaced early by Professor Ian Harper, who recently headed the government's competition policy review.
It is unusual that board members are given a second term.
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Ian Harper to replace John Edwards on RBA board

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A home that hit the headlines earlier this year when it sold under the hammer but actually didn't sell, has now sold four months on.
The hammer fell on a run down Redfern home when builders Sean Piper and Martin Allen outbid everyone to land the property for $1.36 million at its July auction.
After the price passed $1.35 million, Cooley Auctions auctioneer Jake Moore had indicated the reserve had been reached. It hadn't. He slammed the gavel down and shouted "sold" at $1.36 million.
But then the perplexed listing agent Cheryle Lanthois from Carrington Real Estate belatedly intervened. The house apparently had not been “sold” at all.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/13/boronia2.jpg" alt="">
“I’m sorry, I’ve made a mistake. The written reserve was $1.4 million — I had it as $1.3 million. Come inside and we’ll negotiate with the vendor,” Moore told the top bidders.
“We’re not negotiating — that’s it,” Piper said, the Sunday Telegraph noted.
Mr Moore: “I sold it under the written reserve — it’s my fault. It’s not the owner’s fault, it’s not Cheryl’s fault, it’s my fault.”
Lanthois confirmed that the vendor wasn’t selling at $1.36 million, but holding out for $1.4 million.
Discussions went on after the Boronia Street auction, with the eventual line from Carrington Real Estate agent Cheryle Lanthois saying the property had passed in because the reserve hadn't been met.
Piper and Allen understandably weren't best pleased and didn't want to go as far as the $1.4 million reserve.
After all the toing and froing, the home went on to sell late last month through different against BresicWhitney for $1.34 million, marginally less that the price the hammer fell at.
The Boronia Street home was a run-down three-bedroom terrace with peeling paint, squeaky floorboards, mouldy walls and outdoor dunny. 
 
 
 
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