For as long as auctions have existed in Australia, agents have been ‘working’ the system.
For years, state and territory governments have been passing laws to reel agents in and to impose some type of transparency on a practice that is less than transparent. Despite all the imposed checks and balances, dummy bidding is still being encouraged and underquoting on properties on the quiet ‘don’t tell anyone but’ is the ‘new black’ in the auction process. Agencies have become very adept at sidestepping the rules on price guides and governments simply continue to keep passing new laws that cause agents to scream and shout about how badly treated they are.
Agents and their representative bodies are squealing loudly and urging consumers to lobby politicians to stop all the new laws that they have in effect brought on themselves. The level of faux distress and angst from real estate “professionals” is comical to observe.
Those protesting the changes should heed experiences from the past in other industries such as Financial Services and consider the following points:
Firstly, agents only have themselves to blame. If they were transparent and competent in their dealings with vendors who choose the auction process and with buyers who are genuinely wanting to get into the market, changes to the laws would not be needed.
Secondly, most agents are distorting reality when they claim that their protests are motivated by a genuine concern for consumers. Their motivation is purely self-interest and nobody does self-interest like a real estate agent, they have made it into an art form.
Thirdly, property vendors and buyers are unlikely to join the protest supporting price guides and other auction practices that have come under scrutiny because there’s no downside for them in the changes to the laws.
The reality is that price guides are worthless. Most agents commonly under-quote potential price points for auction properties to try and attract interest and large numbers of potential bidders on auction day to create a feeling of real competition. The real casualty of these practices is the myriad of potential buyers who waste their time and money on pursuing properties that they never stood a chance of successfully bidding on as they were never in their price range. Buyers waste time and money arranging for Building Inspections and pre-approved finance that they would never have bothered with if they knew the real price story going on with the agent.
It is frustrating for buyers, many of them young couples who think they have a chance on a property, only to discover on auction day that the reserve price was always higher than the top of the price range indicated by the agent with or without price guidance laws. Buyers would be much better off if they diligently conducted their own research looking at recent sales and on market data rather than relying on the rubbery figures that agents continue to disseminate.
Whenever the media or consumer affairs personnel have surveyed agent price guides or price indicators and compared them with the actual sale prices, they have found that most of the time this information was deceptive and misleading. Agents simply laugh off what is actually a form of advertising fraud and governments are within their rights to change laws and legislate to stamp out these fraudulent practices.
The loudest noise is usually heard coming from The Real Estate Institute of New South Wales, who claimed that a ban on price guides would harm consumers. It said such a move would reduce “transparency” at auctions. When Queensland introduced their new auction laws John McGrath claimed that ‘Queensland is facing a dire situation” and that the move is “insane”.
So, will we ever see transparency at auctions? I think not as the typical auction is the antithesis of transparency. It is the ultimate ‘pea under the thimble trick’ where buyers are put at a massive disadvantage and strangely in most cases vendors don’t come out better off.
Any laws that ensure that agents are prevented from misleading consumers with dodgy and contrived price indicators or price guides has got to be a positive one.
In one of his many media statements on this issue, McGrath said: “Every buyer I have ever met in all of my years as an agent wants price guides.”
Sorry John, no they don’t! Buyers don’t want price guides, what they want is accurate and honest pricing information that will allow them to decide if the property in question is within their budget. Given that the real estate industry has proven to be incapable of providing honest pricing information the only option open to governments is to ban price guides and the associated misleading auction practices altogether.