Many Victorian Home Sellers Set Reserves Above Price Guide
Data from the Homer property app shows 19.5% of 1,263 Victorian houses going to auction had a listed reserve above the earlier price guide. The state's new rules, in force since October 16, require sellers to publish the reserve at least seven days before the sale.
Many Victorian home sellers are setting reserve prices above their advertised price guides, though most are not. Of 1,263 houses due to go to auction in the first two weeks of the state's new auction rules, 19.5% had a listed reserve above the previous guide, according to data from property listings app Homer.
The legislation took effect on October 16. Sellers must now publish their reserve, the minimum price they will accept, for at least seven days before an auction or the end of a fixed-date sale.
What the data shows
More than 70% of reserves sat within the guide range, Homer found. Another 9.1% came in below it. Listing a reserve above the guide is allowed under the rules.
The policy was introduced to address underquoting, where a home is advertised below what the seller will really accept. It aims to give buyers more transparency.
Homer chief executive and co-founder Henry Pedersen said the timing may hide the true figure. The rules arrived in a down market.
"I think if this was done in a stronger market it wouldn't be 19.5 per cent ... it would be 40, 60, maybe 80 per cent," he said.
Pedersen also said 37% of vendors listed their reserve at the top end of the range. That could mean buyers are being "step-quoted", nudged upward toward the vendor's real price during the campaign.
Why sellers aim high
Dr Kristle Cortés, an associate professor at UNSW Business School, said sellers often take a while to adjust to a changing market. Sentiment plays a part too, she said.
"They also have a sentimental attachment ... and maybe they're just not willing to go below a certain amount," she said.
Cortés stressed that the rules began in a period of extreme change. Prices were falling, the federal government had changed the tax treatment of negative gearing and capital gains, and interest rates were at an 18-year high. That made it hard for buyers and sellers to settle on a price.
Rick Daniel, the selling agent at Nelson Alexander Fitzroy, said he understood why some vendors aim higher in the final week to "protect their bottom line". He distinguished the price guide, shaped by recent sales and an agent's experience, from the reserve. He said Homer's data shows the agent's assessment matches the owner's eventual reserve in 80% of cases.
A buyer's view
Chloe Sheats and Oliver van Toledo nearly skipped the auction of a three-bedroom Fitzroy home. The 1860s bluestone house carried a price guide of $950,000 to $1,045,000, and they assumed it would sell for far more.
They were buying under the 5% deposit scheme, capped at $950,000. When the $950,000 reserve was published in the final week, Sheats, a 27-year-old tech sales executive, decided to turn up.
"If the reserve had been anything above $950,000 ... we probably wouldn't have even dropped in to see what it went for," she said. The house passed in on a vendor bid of $920,000, and within the hour they bought it for the listed reserve.
Pedersen said publishing the reserve during the campaign could save buyers money. "But at least now, with that week of the campaign where the reserve is publicised, it could reduce the costs buyers have to go through," he said.
