‘Demands a response': Peak real estate lobby backs underquoting overhaul
As defined in Victorian law, underquoting occurs when the published price for a property is set lower than it might reasonably be expected to sell, but is notoriously difficult to prove.
There is also no requirement for the advertised price to match the owner's reserve, unless they disclose this to the agent ahead of time. This is one reason properties are passed in even after bidding passes the top of the advertised sale price range.
The REIV's change of policy on reserve prices represents a fundamental shift for the group, who in their submission to the 2022 property review said it strongly opposed the mandatory public advertisement of a reserve price, arguing it would 'undermine the entire auction process'.
In detailing the REIV's changed position on reserve price disclosure, Caine said he believed it would be appropriate that the reserve price would be disclosed some time during a property's auction campaign, rather than at the very beginning.
'In the initial phase, we're leaning towards later in the campaign… closer to the auction, so the owner and the agents have had the opportunity to receive the feedback from the buyers who will ultimately inform where that price will sit.'
In 2022, the Consumer Policy Research Centre surveyed 500 Victorians who had purchased, or were in the process of purchasing, a home. It found that 17 per cent of those surveyed had paid for seven or more building or pest reports.
'At the time, we calculated that's costing them $4200 additional to their search process,' said the organisation's chief executive, Erin Turner.
Turner said she had begun the research unsure that underquoting was a major problem, but was left convinced the illegal practice caused real financial and other harm.
The centre made the same recommendations to the Victorian government that are now being backed by the REIV; that a property's reserve price is published and that home sellers provide potential buyers with free building and pest reports, a model already in place in the ACT.
'One of our theories here is that first home buyers, or people buying in areas they're less familiar with, are more likely to be caught paying for multiple building and pest inspections. It's your less sophisticated buyer that's more likely to be harmed,' Turner said.
'It's so important that we put these protections in place generally, but we also suspect that these protections are going to help the people who need it most.'
Victorian opposition consumer affairs spokesman Tim McCurdy has backed a middle-ground solution, where vendors would not have to reveal their exact reserve but make sure it sits somewhere between the advertised guide.
'If their reserve price is not within the band, it is farcical,' he said.
This masthead found examples of homes where the reserve was hundreds of thousands of dollars above the advertised price, while a survey of about 8000 readers overwhelmingly backed the disclosure of reserve prices. Almost 92 per cent supported the policy shift.
Melbourne man Jeremy van Dijk is among them. While searching for a property to buy with his wife in the city's inner north last year, the pair were the highest and only bidder at an auction for a two-bedroom home in Brunswick East, and made a bid within the advertised range.
However, they were unable to secure the home because they had not yet hit the reserve.
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When he questioned the agent about the discrepancy between the price guide and the reserve they replied that it was the owners who determined the reserve price.
'I think it would make the whole system more efficient and stop wasting so many people's time,' said the economist, in support of the proposed change to disclose reserve prices.
'It was just wasting so much of our time, and when you multiply that across the whole population, it's just so many hours lost, it's unbelievable.'
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