Buying property – either as a residence or for an investment – at auction can feel a little like betting on the horses. You are never sure what the final odds will be or if you are going to get anything back at all. Real Estate ads for properties going to auction will either give a price guide or no indication of what the reserve price is.
This can leave buyers in an awkward position. Without a reliable indication of the sale price of the property you have to decide if it is worth proceeding with property and pest inspections and valuations. If you do go ahead and the auction price exceeds your budget, then any outlay you’ve made is lost and you’re left to repeat the process over again.
The Queensland government is proposing legislation that prevents Real Estate agents from volunteering price guides on residential auction properties.
This would appear to fly in the face of logic as, for the majority of buyers, price is one of the predominant factors when shortlisting potential properties. Buyers want to know what ball-park figure will be reached at auction. Seasoned property purchasers understand that auction results are subject to many factors and can vary widely from the indicated price, however in the past the practice of ‘under-quoting’ has left some buyers frustrated. It is unwise to take the price indications as a true measure of what will happen during the auction. It only takes two enthusiastic buyers to push the final sale price well beyond the expected cost of the property.
To counteract the unreliability of price indications in property advertising, it has been argued that it is the reserve price at auction that should be made available to the buyers. When a reserve price is undisclosed, buyers can be left feeling cheated when the reserve is revealed, at auction, to be higher than expected – and often out of their budget range. By making the reserve price available to buyers , they are then able to make an informed decision regarding their ability to afford a property once it is placed on the market at auction. What their budget tolerance is beyond that price is then in their hands.
To avoid confusion of price guides, reserve prices and expected auction performance, engage a buyers agent for clear advice on specific properties as well as full auction attendance and bidding services.
