Real estate agents in Victoria will be legally required to reveal a property’s reserve price a week before auction, under nation-first laws to crack down on underquoting.
The Allan government on Thursday announced that agents must publish the owner’s reserve price at least seven days before auction day or a fixed-date sale, under the reforms to be introduced to parliament next year.
Real estate agents that fail to disclose within the timeframe will be unable to proceed to auction or sale.
Illegal underquoting is an industry tactic used by some agents who advertise a property for less than the estimated selling price or the owner’s asking price. They do this to draw buyers in and drum up competition.
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Victoria’s consumer affairs minister, Nick Staikos, said the government wanted to ensure the housing market to be fair.
“Underquoting isn’t fair and it’s young Victorians and families paying the price,” he said in a statement.
One Melbourne-based buyer’s advocate David Morrell said the changes would bring “some sort of transparency” and save people “a lot of time and angst.”
But Morwell said he feared real estate agents could turn to expression of interest campaigns – where buyers are invited to submit their highest and best offer – with no set timeframe, rather than rely on auctions for all sales.
“The real estate agent, by nature, likes to keep everyone in the dark,” he said.
But another buyer’s advocate, Cate Bakos, said a lot of buyers don’t like expression of interest campaigns.
The Real Institute of Victoria (REIV) said the government’s approach was “overly narrow” and “reactive”
“The REIV has long supported greater price transparency. However, the approach announced today is a disproportionate response that risks disadvantaging vendors in its current form,” it said in a statement.
Victoria’s new opposition leader, Jess Wilson, who has outlined housing as one of her top priorities, on Thursday said the reform would do “nothing” to make homes more affordable.
The Greens said the reform mirrored a bill the party introduced in August and welcomed the reform – but warned further changes were needed for a system “stacked against first home buyers.”
The party had proposed mandating the reserve price be released from when a property was first listed.
Last year, a Guardian Australia analysis of property sales data showed underquoting (defined as any sale where the final price exceeds 10% of the pre-sale price guide) is more prevalent in Sydney (20% of sales) and Perth (18%), and least prevalent in Canberra, Hobart and Darwin.
The analysis found the mismatch between the price guide on property ads and the final sale price was worse for houses than townhouses or apartments and is much more likely when the property is being sold at auction than at private sale.
Under the changes, real estate agents would be required to update all marketing materials to reflect the reserve price and stop using any previous advertising that does not contain the reserve price.
The proposed laws come after the Victorian government earlier this month introduced stricter guidelines for agent’s selection of comparable properties to determine a home’s price guide.
Last week, the NSW government announced new rules for real estate agents that would mandate price guides on all advertising and a statement of information offered to buyers backing up their estimated sales price – similar to Victoria’s existing system.
