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New laws that will allow auction bidders in South Australia to see the property's reserve price will damage both the buyer and seller, according to members of the real estate industry.
Deputy premier and minister for business services and consumers John Rau said the laws will mean fairer auctions for South Australian homebuyers.
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“These laws are another important step in protecting the rights of South Australian consumers,” Mr Rau said. “The changes mean that if a price for property to be auctioned is advertised, the buyer will know what the vendor is willing to accept.
“Importantly, this eliminates the shoddy practice of under quoting, which is used by some rogue agents.”
In November last year, Mr Rau vowed to stamp out the practice of bait pricing. However, president of the Real Estate Institute of South Australia (REISA) Greg Troughton said this was not the way to do it.
"When you know the reserve, that has an impact on the auction and will have a dousing effect on the bidding," he said in November.
Managing director of RE/MAX Geoff Baldwin claimed the new laws undermine the entire premise of an auction.
“The whole concept of an auction is to allow potential buyers to decide what they think the property is worth. By disclosing the reserve price, which is often well above the eventual selling price, the whole process is destroyed,” he said.
Mr Baldwin believes buyers can be turned off by the perfect property if the reserve price is above their budget, when they would usually inspect the property and agree that dipping further into their pockets is warranted.
“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," he said.
“However, if the reserve is disclosed, these prospective buyers may often simply not inspect.”
