Interests of homebuyers and sellers collide in fight for transparency

Victorian laws force house price transparency in national fight against underquoting In short: Victoria has introduced new laws to target real estate agents underquoting house prices to try to bring more transparency to the market. Parts of the industry are supportive of the move but say the laws are confusing and inconsistent. Industry figures say the laws do not take into account changing market and auction dynamics, which can significantly move the reserve price. New laws will let prospective homebuyers know the price a seller is willing to say "yes" to. The Victorian laws that came into effect at the start of the month are being watched closely nationally and present radical transparency both before and after sales. They will force agents to: - Make the reserve price public at least a week before an auction. - Publish the sale price for at least a year and a half after the sale. The laws aim to reduce underquoting, when agents market a property for a price for well below what it is expected to sell for to artificially generate interest in a property. "Victorians are sick of wasting their weekends chasing homes they were never going to get," said state Minister for Consumer Affairs Paul Edbrooke. But Real Estate Institute of Victoria (REIV) chief executive Toby Balazs, who represents agents, is opposed to the details of the new laws. "If you look at the problem that was trying to be solved, egregious underquoting, and the results — people wasting their time and money on getting things like building reports — that's a good thing," he said. "We just don't think this is the way to do it." The institute thinks potential buyers should have guidance on the likely range a property will sell, but not the precise figure. Because most sales campaigns run for a month and the reserve price must be published 7 days before the auction, Mr Balazs argues there is little time to get feedback from potential buyers. "What you're probably going to get is overquoting … because if I [quote] over, it's easier to come down." He argues the seller (otherwise known as the vendor) "has a right to manage what is the sale of, most likely, their biggest asset". Laws with good intent but poor design, expert argues Independent property economist Cameron Kusher is all for crushing the scourge of underquoting, which is generally illegal in Australia. But he does not think these laws will do it. "Declaring [the reserve] on the morning of, or before the auction commences, is a much better solution than having to declare a week out," he said, because agents and the seller were still understanding who the bidders were likely to be and what they were willing to pay. Cate Bakos, a buyer's advocate in Victoria, agreed and added that, while underquoting was a big problem, the new laws could make things more difficult for both vendors and buyers. "It's been a problem for a long time. I've been in the industry for 23 years and it's been a problem for every single year,"she said. "Seven days is a long runway for vendors, I don't think it's enough and it will make it really stressful for them." She said that, ultimately, real estate agents would still find a way around the rules. Confusion over new rules Ray White Group managing director Dan White said the new laws were inconsistent and confusing for buyers, vendors and agents. He said the company was given conflicting advice from the government on whether the reserve could be changed after it was set. The government did not respond to ABC requests for clarification. "The minister said you can change it, and the cabinet said you can't," Mr White said. But, he said, the reserve was only one piece of information and buyers should do their own research. While the new laws mean the property price statement now includes a swathe of facts about the property, Ms Bakos says this could make buyers feel more informed than they really are. "I'm concerned that buyers will have a false sense of security." It will now include new information such as the internal floor area and number of car spaces, but she says it misses key facts about the zoning and land quality. "What's the point of counting bedrooms and car spots if it's in a flood zone?" But a normal consumer would not understand these implications that could have a significant impact on the property's value, she said. Unclear if other states will follow New South Wales has been cracking down on underquoting, but is not using the same types of laws as Victoria. In February, NSW Fair Trading introduced a Name and Shame register that publicly lists fines and breaches from real estate agents and strata managers, including underquoting. The government conducted 131 inspections across July to September and 31 penalty notices were issued, totalling more than $68,000. While underquoting is generally illegal Australia-wide, no other state has said they were planning on introducing similar laws to Victoria. Will this lower prices? Victoria's property prices have been falling, or rising more slowly than other jurisdictions, in recent years. Expanded supply and a swathe of new rules and taxes that have made property investment less attractive have seen the median property price fall to the lowest of all the capital cities bar Hobart and Darwin in recent data. These changes are unlikely to alter that picture. Property Council of Australia Victorian deputy executive director Andrew Lowcock said greater transparency alone will not solve housing affordability. "The biggest drivers of prices remain supply and demand," he said. "If Victoria wants more affordable housing, it needs to focus on getting more homes built." Real Estate Institute of Victoria's Toby Balazs feels the same. "It won't affect prices at all," he said. Ms Bakos said it was unlikely to affect prices over the longer term, but that the timing of adding the laws to a downward market was "terrible". "If you're in a hot market, you can set the reserve price as whatever you want." Loading...