New auction price guide bans would affect Qld and NSW buyers

IMAGINE walking into a clothing store to buy a new shirt or dress, only to find that none of the items have price tags on them. When you ask staff how much the clothes cost, they refuse to tell you, explaining that by law, they are unable to discuss what anything might be worth.

The only way you can buy clothes is to outbid the other customers in the store, but if you’re anything like me, you have no idea whether a T-shirt is worth $10 or $200. You check a few nearby stores to get an idea of what the clothes might be worth, but they have no price tags either. You search the clothing brands online, but again, nothing.

You then find out the government has passed legislation to outlaw retail prices being disclosed before you buy, in order to benefit … the customers.

It sounds ridiculous, but something similar may soon happen in Queensland. However, rather than being on a trivial financial decision like clothes, the government is considering proposed legislation to ban price guides on properties going to auction, which would affect the biggest financial decision of people’s lives.

The Property Occupations Bill aims to separate the real estate industry from the motor industry in Queensland; an overhaul that is very much needed. However, some parts of the bill need work, because banning property price guides makes no sense.

Designed to combat the already illegal practice of underquoting, in which an agent tries to drum up competition by telling buyers the property is likely to sell for lower than it will, the legislation would cut all price communication between buyer and agent.

Most house hunters see agents as a valuable source of advice on their local real estate market. Without their help, you may as well be Ray Charles picking a new wall colour from a paint swatch.

Sellers might be all smiles, but buyers will be in the dark.

The ban would also bafflingly extend to online searches, meaning people could no longer filter properties by price range. Instead you would be looking at pages of homes, not knowing they were hundreds of thousands of dollars out of reach. You might have pest and building inspections done and attend the auctions, only to have your budget blown by the first bidder. Another massive chunk of time and money wasted.

The bill would set a dangerous precedent for other states and also affect the large number of NSW buyers looking to enter Brisbane and Gold Coast markets for affordable prices and attractive yields on investment properties. Trying to invest from interstate without price guides would be even more of a nightmare and may deter any number of Sydneysiders from making a sound long term investment.

Price guides are only a starting point. Even though properties seem to be constantly selling at auction for well above their guides, there is a level of understanding about this. People know auctions are about outbidding the competition, not being the first to match the price guide.

The one concession that the legislation would allow, is that an auctioneer or agent could provide a written opinion (by letter, email or fax) of what a property was worth, at the direct request of a “serious buyer.” However, to get information on a number of properties, a buyer would have to put in individual requests to each agent and then await their replies. By the time they have done that, someone else will probably have bought the property and be half-moved in. It can be hard enough to get some agents to return a phone call, let alone dust off the typewriter and fax you an at-best moderately helpful letter.

The negative aspect of underquoting is a minor issue compared to a blanket ban on all forms of advice. Buyers are not property professionals and might only buy several properties in their lifetimes. They might be entering the market for the first time in 20 years and we all know how different prices were in 1994. Without other prices to compare to, most buyers will have about the same idea of what a house is worth as I do about a pair of Carrie Bradshaw’s shoes.

The Qld parliament was originally going to vote on the proposal last week but have delayed, while the government considers whether it will vote on the legislation in its current form. Now is the time to apply the blowtorch and make sure this legislation is revised before a massive backwards step becomes law.

Story source: http://www.dailytelegraph.com.au Story by Tim McIntyre