Hi,

A huge auction weekend with 1,005 auctions reported to Domain and the preliminary clearance rate coming in at 65%.  657 properties sold, 133 were withdrawn and 215 passed-in.  In comparison, the clearance rate for the same time last year was 57%.  Whilst the clearance rate dropped slightly again over the weekend, the auction numbers were strong.  We attended 7 auctions and all were strongly contested with multiple bidders and all selling under the hammer.

Big headlines in the media last week about ‘underquoting’ and a proposed new auction system that could force vendors to advertise their reserve price 7 days prior to auction. This proposal will be presented to parliament by the Victorian government next year.

I don’t believe anyone will question the fact that ‘underquoting’ was still an issue but from what I have experienced first hand this year, that rising property prices were often the reason why properties were selling well above the advertised price rather than the property being underquoted.

That being said, from time to time we do see properties ‘passing-in’ above the advertised price or not being announced ‘on the market’ well and truly past the quoted price.  There have also been many occasions where the advertised price range has not been lifted after an pre-auction offer had been rejected.

The Victorian government are trying to make it fairer for buyers with the vendor’s being forced to be transparent and advertise their reserve price 7 days prior to auction.  However, there are issues with this strategy and I believe this may even lead some vendors to sell their property via a private sale or expressions of interest campaign, which brings us into a non-transparent method of negotiating which can be more complicated and misleading.

In addition to this, whilst the transparency may be a positive to understand where the vendor is at with price, it still has no reflection on what a property is worth and it is still up to the buyer to do their own due-diligence around that.

Whilst this method could reduce some buyers from wasting their time attending an auction they were likely never to buy, it also could disadvantage buyers by the vendor not having the opportunity to change their reserve prior to auction (increase but also decrease).  And how is this going to work in situations where there are multiple decision makers who don’t agree (eg. deceased estate or divorce)?

There are many questions being raised with this reform and I am unsure whether the proposed strategy is going to help.  There are other methods of negotiating available to agents that these new reforms will not cover.  Whilst auctions can be terrifying and difficult to navigate for some, what they do offer is transparency where you can visibly see where the buyers are at with price which all other negotiating methods do not offer.  It will be very interesting to see what transpires.

Have a great week

Kim Easterbrook – Managing Director