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Reserve prices go public: What Victoria’s new rules mean for you
Victorian sellers’ reserve prices will soon need to be published ahead of auctions and fixed-date sales, with the final price also made public. Here’s how you’ll be impacted.
Victoria’s new property laws come into effect on 1 October, requiring a vendor’s reserve price to be published seven days ahead of auctions and fixed-date sales.
Additionally, a property’s final sale price must be published within seven days of becoming unconditional, and be made publicly available for 18 months.
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.
Here’s what you 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.
How will it impact buyers?
Purchaser-agent relationship
According to Hatzimoisis, the changes were likely to lead to better communication between agents and buyers, as realtors seek to gauge purchasers’ thoughts on reserve prices.
“Agents will need to be in constant touch – it’ll improve the follow-up calls, the service levels that agents provide to buyers,” he told SPI.
“They’re going to have to be in contact with them to an even better level.”
As a result, he said buyers can experience greater transparency and have an indication of how much the seller expected the property to transact.
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“Buyers will either react by saying, ‘Yep, that seems reasonable’, or ‘no, it doesn’t’, and if it’s not reasonable to them, they won’t want to get involved,” he said.
Treating the reserve as a minimum
Hatzimoisis said that disclosing the reserve price may risk buyers treating it as a non-negotiable minimum, but warned that the vendor can still sell the property for less.
“Once the auction commences, a vendor is free to make a decision, so if the property is going to have active bidding and it sells for over their reserve, so be it.
“But if it stops shy of their reserve or below their reserve, they’ve still got the right to accept that offer.”
Hatzimoisis said it was important for buyers to be informed about this, instead of being intimidated by the reserve price right away and refusing to consider the property.
“And then they find out that it sells for less and that they probably would’ve paid that price,” he said.
How will it impact sellers?
Pricing strategy
According to Hatzimoisis, the new rules were going to force sellers to “have a really long think” about their pricing strategy to ensure it was reasonable and reflected the market feedback.
“They’re going to have to really take all the feedback and the buyer sentiment into account if they want their property to sell and if they want to attract enough interest to create competition,” he said.
However, Hatzimoisis said that not all properties had to be priced lower, as each vendor’s strategy would depend on the property and the type of feedback they had received,
“Some properties might perform better than expected, in which case they may need to lift their expectations,” he said.
“It’s not always ones where you’ve got to move downwards. They may have to move upwards on their expectations depending on the buyer feedback.”
Hatzimoisis ultimately said that as long as the seller listened to the agent, they would be able to price their property in line with market expectations to draw enough engagement.
“Those people that are out there looking, they actually want to buy a property,” 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, they should seek advice from their agent about the best way to sell the particular property.
“Agents may get 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 vendors did 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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