Industry leaders demand more transparency in real estate pricing

Real estate industry leaders have backed calls for more transparency and tougher regulation of price guides at auction, including moves to enforce the disclosure of vendor reserve prices and mandating published guides on all listings.

The calls come after a data-mining investigation by The Sydney Morning Herald and The Age, Bidding Blind, into industrial-scale underquoting across auction markets revealed rampant underquoting across much of Sydney.

In an analysis of more than 36,000 auction sales in NSW and Victoria, Sydney emerged as the underquoting capital of Australia, with half of all sales landing more than 10 per cent above the advertised guide, and 16 per cent going for 20 per cent or more.

Matt Lahood, chief executive of The Agency, said he would support disclosing the reserve price during the latter stages of an auction campaign to bring much-needed transparency to the process in conditions where it was a standard sale.

However, Lahood said published reserves wouldn’t work in cases where the vendor was an institution, such as a bank or public trustee, nor on deceased estates where there were often many vendors who could not agree on the reserve.

Sotheby’s International’s managing director Michael Pallier said he would “support anything that brings more transparency to the process”.

“I’d not only include making the vendor reserve public, but also introducing published price guides, as they do now in Victoria.”

Shannan Whitney, of BresicWhitney, shied away from published vendor reserves, but agreed that published price guides would be a big improvement, not only for buyers, but also for agents.

He also said if a vendor insisted on a higher price than an agent recommended, this should be published too.

“Essentially, it turns the process into a private treaty one and will take longer to sell. Once the property has been on the market for long enough, and if it’s unsold, then the auction process can be introduced once the price gap has narrowed.”

McGrath Estate Agents founder and chief executive John McGrath strongly supported any changes that created greater transparency, but said sellers should retain the right to accept or reject any offer.

“The real issue isn’t reserve pricing, it’s agent compliance with existing price guide regulations,” McGrath said. “If agents follow a straight bat with current quoting rules, transparency issues largely disappear.”

On Monday, Premier Chris Minns said he reserved the right to look at legislation that would force agents to publish the vendor reserve before auction, but there were no immediate plans to do it.

The NSW Office of Fair Trading is looking at potential industry reforms by way of a series of roundtable forums with stakeholders. Key among those measures are increased penalties for underquoting and a similar model to Victoria that offers better pricing guides for buyers.

Tim McKibbin, chief executive of the Real Estate Institute of NSW, is among those working in the background with Fair Trading on the reform process.

“What I can say is that we are committed to finding a solution, everything is on the table and some encouraging progress has been made,” said McKibbin.

McKibbin’s industry lobby group chief counterpart in Victoria, Jacob Caine, revealed on Sunday that the institute would support the introduction of reserve price disclosure as well the adoption of a new model that would provide free building and pest reports to prospective home buyers.

The rules around property pricing are tighter in Victoria than in NSW.

Victorian legislation makes price guides mandatory on marketing, and price estimates must be accompanied by a statement of information showing comparable sales that inform the estimate.

In NSW, Liberal leader Mark Speakman said he would consider the issue of whether vendor reserves should be published, but as yet the party hadn’t committed to a position.

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