Major real estate reform revealed to combat Victoria underquoting
Industry experts have been warning the state's legislation to protect homebuyers has been flawed since its most recent iteration was brought into play in 2017.
The Herald Sun reported in 2023 on a forum held by prominent real estate identities John Keating of Keatings Real Estate and David Morrell of Morrell and Koren buyers agency, calling for mandatory reserve disclosure as a potential way to improve the situation.
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Mr Keating had run another similar forum in 2010, and the Herald Sun had reported on his call for mandatory disclosure as early as 2009.
It has not previously been backed by the state's peak real estate group, the Real Estate Institute of Victoria.
But in a statement today the REIV has indicated it 'supports reforms to strengthen professionalism and public trust', and specifically denounced 'unlawful underquoting'.
Acting chief executive Jacob Caine said practical reforms were needed to transform the property sector, such as 'mandatory reserve price disclosure rules for sellers prior to the auction'.
The REIV statement also notes that the legislation is not clear on what is and isn't underquoting, and leaves many scenarios of a competitive sale exposed to accusations of poor agent behaviour — despite it being agent's duty to achieve the highest price possible.
'We urge the Victorian Government to undertake a thorough consultation process involving
sector stakeholders, like the REIV and its members, aimed at arriving at a clear and robust
legal framework for underquoting,' Mr Caine said.
'While the immediate focus is rightly on underquoting, this shouldn't distract from the way in
which continuing housing supply issues are compounding the problem and the vital need for
property sector settings that deliver a fairer and more efficient property market for all
Victorians.'
He added that it was important to distinguish that a sale above reserve doesn't 'categorically prove underquoting' — as values can change quite rapidly in some circumstances.
Mr Caine said that with only 49 fines issued in the past 12 months, and about 30,000 auctions held across Victoria in the same timeline, there was evidence underquoting was not 'endemic or prevalent'.
'Though, certainly, within those 30,000 there are people who have underquoted and gotten away with it,' he said.
'But agents are the number one group making complaints and that's because the sector despises the practice.'
Keatings Real Estate's John Keating said he had been publishing reserves for homes sincer 2003, and had sought to have it mandated as early as 2009 when the Herald Sun ran several stories on the topic.
While not convinced there would be change now, Mr Keating said he hoped 'it's not just another regular media bashing of the auction practice, which has been done and faded away before'.
He said debate on the topic of mandatory disclosures was important, and that he still believed it was the best solution to underquoting – though it was challenging to price some properties.
'It's not an exact science,' Mr Keating said.
Prominent buyer's agent Cate Bakos said while sometimes homes just sold for more than expected, 'the legislation is so wrong'.
Ms Bakos said Victoria's Statement of Information legislation, brought in to remedy the situation in 2017, had in many instances made things worse by giving bad agents a chance to justify poorly priced properties — then leaving it to the buyer to spend half an hour reviewing those comparisons to work out if they were being misled.
'Some are obvious but others have a flood plain or the wrong development zone,' she said.
'That's a lot for an inexperienced buyer to work out.
'The statement of information is a terrible way to police this.'
Ms Bakos added that if legislation was changed, vendors would follow it.
One simple change would be to require agents to provide buyers the same three comparable sales they provide to the vendors when they are looking to list the sale.
There would also need to be some consideration provided as to how vendors set their final reserve, which currently does not have to match what is advertised or on the sales authority.
Another high-profile buyer's agent, Property Home Base's Julie DeBondt-Barker said while obvious solutions like disclosing vendor's reserves or requiring prices to be within 10 per cent of them made some sense, the notion would meet resistance as there could be complicating factors.
But there could be solutions to minimise buyer frustration by requiring vendors to provide building and pest inspections upfront, instead of buyers paying for one at each home they consider purchasing.
'And one other thing that should be absolutely legislated is, if it's a public auction — why aren't all auction results published,' Ms DeBondt-Barker said.
'And that would give a little bit more transparency to the buyers.'
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