New South Australian pricing laws will hurt sellers & buyers
July 3rd, 2013 by Geoff Baldwin
Changes to laws affecting real estate pricing by agents have the propensity to make auctions in that state redundant, are unfair to home sellers and buyers and are a dangerous precedent for other states according to RE/MAX WA Managing Director, Geoff Baldwin.
He was responding to the recent changes introduced in South Australia whereby agents and sellers will be compelled by law to list one set asking price rather than a “bidding range” and whereby the reserve price must be disclosed before each auction.
“The whole concept of an auction is to allow potential buyers to decide what they think the property is worth but by disclosing the reserve price, which is often well above the eventual selling price, the whole process is destroyed”, Mr Baldwin said.
“This is a classic example of misinformed bureaucrats who have no coal face real estate experience, overstepping the mark without considering all of the consequences and as a result sellers and buyers having their opportunities significantly reduced.
“Any experienced agent will tell you that in the greater majority of cases buyers will spend around 5 to 10 percent more than their original budget due to not being able to satisfy their needs and wants within that budget.
“Because the auction process does not provide a definite price buyers are more likely to inspect and despite the reserve price, which is only ever a seller’s wish price, they will offer what they are willing to pay however if the reserve is disclosed these prospective buyers may often simply not inspect.
“In regards to providing “bidding guide” ranges, if they are intentionally misleading then they should not be used however it is often the case that a property will eventually sell 5 to 10% below or above reserve so who is to depict what is unreasonable?
“What a wider range achieves is attracting people to inspect so that they can make their own decision as to what the property is worth and often the price they initially offer, although lower than expected, will be accepted once the seller listens to the market.
“Auctions and “Buyer Feedback” ranges bring fairness into the process because buyers get to see properties they may have otherwise ignored and sellers are able to make their decision based on genuine buyer feedback.
“Ill informed decisions such as these made by bureaucrats who are ignorant to the realities of the market set a dangerous precedent for other states and industry leaders need to take a proactive stance on educating their legislators in advance to ensure this is not replicated”, Mr Baldwin said.