Despite promises to crackdown on underquoting in NSW, it’s Melbourne where agents are exploring avenues that benefit buyers and sellers.

Petitions calling for legislation to mandate the publishing of reserve prices were circulated last year in Sydney and Melbourne by buyers’ agents Patrick Bright and Miriam Sandkuhler.

Yet it seems we may not need to wait for the law to change for agents to step up to the plate. A handful of real estate agents are taking it upon themselves to clean up the industry.

Over the past month, Caine Real Estate CEO Jacob Caine slowly introduced the publishing of reserve prices to his real estate agency.

Long frustrated by the lack of transparency around price advertising, he saw this step as the logical progression towards fairness for sellers and for buyers, who are often left “humiliated” when an auction quickly heads above their price bracket.

“Our job as residential sales people is to sell properties for the highest possible price by marketing them to the greatest number of people capable of paying, at the very least, the owner’s reserve price,” he said.

“Time and time again we’ve witnessed auctions where disillusioned, confused and downright angry buyers leave auctions that they weren’t even close to in terms of buying capacity.”

Underquoting is good for only one thing – attracting a crowd. Yet a crowd of unqualified buyers doesn’t create a strong auction.

John Keating, from Keatings Real Estate, pioneered the concept of publishing the reserve price more than 10 years ago.

Starting in July 2003, it took him a few years to perfect the process and publish reserve prices regularly.

The catalyst was a staff member who was selling through the agency. He opted for full transparency, beyond just telling buyers about the agency’s relationship with the vendor.

“We discussed how much it was worth, around $220,000 or $230,000. He agreed to advertise the reserve and we set it at $220,000. I didn’t do the auction, I stayed one step back, and it sold at $242,000. That’s how it started,” he said.

Buyers and vendors do need educating around the process and what it means to publish the reserve price, however he finds that most people are attracted by the idea and, in fact, are often more likely to buy.

While Melbourne real estate agents are steaming ahead with this concept, an LJ Hooker agent did sell a home in Bexley, New South Wales last year with a published reserve price.

The 15A St Georges Road home advertised a $570,000 reserve price and achieved $613,000 at auction.

Mr Caine does foresee difficulties in rolling the concept out across Melbourne and other cities, particularly with jaded buyers expecting that every agent has underquoted and adjusting the price accordingly. Some even adjust upwards by 25 per cent.

“We’ve had buyers come to us, who’ve been so conditioned by the market place to adjust way up, and they’ve said: ‘I would have paid more for that property, but I didn’t even come to the auction because I didn’t think you were telling the truth with your range’. Buyers are ruling themselves out of properties arbitrarily that they may otherwise have paid the owner a great price for,” he said.

“But we’ve got such an entrenched and distorted psychology around pricing to compete with,” he said.

Now on the Real Estate Institute of Victoria Young Agents Committee and Members Council, part of his push will be to get other agencies to consider taking this step and encouraging the REIV to explore the option.

“We’d love for some of the big independents to get on board with us – if some of those big guys weighed in we could possibly hit a tipping point,” he said.

Although some independents have started to show their commitment to cleaning up the industry, it may take a bit longer to get the larger agencies on board.

Posted by Jennifer Duke – The Age on 3rd April, 2015