By Jarrod McCabe and Jordan Telfer
In our recent article on underquoting, we explored why a ‘bad quote’ often reflects genuine market volatility rather than agent dishonesty. Within days of that discussion, the Victorian Government announced proposed reforms that would require real estate agents and vendors to disclose reserve prices at least seven days before auction.
The proposal is still in its infancy – more a direction of travel than finalised legislation. But there is enough detail in the public domain to warrant examination. Some elements are welcome. Others risk creating new problems for the very buyers they aim to protect.
What’s being proposed
The centrepiece of the Government’s announcement is a requirement for vendors to publish their reserve price at least seven days before an auction or expression of interest deadline. The stated rationale is to give prospective buyers more certainty about whether a property is genuinely within their budget, sparing them the cost of building inspections and legal reviews on homes they were never realistically in the hunt for.
Alongside this, the Government proposes tightening the Statement of Information – the document agents must provide to justify their quoted price range. That element is overdue. The Statement of Information has become something of a joke in recent years, with agents cherry-picking comparable sales that support their quote rather than genuinely reflecting market value. If the document is to exist at all, it should be rigorous. This change is a positive step.
But the reserve disclosure requirement is where the proposal runs into difficulty.
The timing problem
Victoria’s Consumer Affairs Minister, Nick Staikos has been quoted saying that property campaigns are ‘typically four weeks’, giving vendors ‘a few weeks to properly assess the level of interest’ before setting their reserve. This reflects a fundamental misunderstanding of how auction campaigns actually unfold.
A standard auction campaign spans four weekends, not four weeks. Consider a typical October campaign: first open inspection on Saturday the 4th, second on the 11th, third on the 18th, auction on the 25th. Between the first open and auction day there are three weeks – but crucially, only three weekend inspection opportunities.
Under the proposed legislation, with its ‘at least seven days’ requirement, a vendor auctioning at 10am on the 25th would need to have declared their reserve before the third Saturday – effectively before their third open inspection.
Anyone who has sold property knows that second-last Saturday is vital. It’s when serious buyers return with family and friends to make final decisions. They walk through at midday, tell the agent they need to ‘talk it over’, and the agent spends Monday morning on the phone gauging genuine interest. By Tuesday or Wednesday, the vendor finally has a clear picture of where the market sits. Requiring the reserve to be locked in before that critical weekend robs vendors of the information they need to price their property accurately.
A marketing campaign is not a one-way broadcast. It’s a two-way education process. Vendors often begin with a view of what their property is worth based on comparable sales – but the campaign itself either confirms or challenges that expectation. Heavy traffic and strong feedback at the first two opens might signal the need to lift the quote. Sparse attendance might demand a reduction. Forcing vendors to commit to a reserve after just two weekend inspections denies them the market intelligence to set it correctly.
Why reserve disclosure won’t deliver certainty
The deeper issue is that knowing the reserve tells buyers very little about what a property will actually sell for.
A vendor’s reserve for a property in high demand could theoretically be set at one dollar – the market will determine the final price regardless. We’ve all walked away from auctions hearing the crowd mutter that ‘they paid way too much for that’. But value is in the eye of the beholder. Two or three buyers who see value well above the quote will drive the price beyond anything the vendor anticipated.
A property quoted at $1 million to $1.1 million, with a reserve disclosed at $1.1 million, can still sell for $1.35 million if two emotional bidders want it badly enough. That’s not necessarily evidence of underquoting – that’s the auction system working as designed. No legislation can regulate human emotion out of residential property.
Buyers who assume reserve disclosure means budget certainty will find themselves just as disappointed as before – only now with a false sense of security.
Unintended consequences for buyers
Perhaps the most troubling aspect of early reserve disclosure is how it could be weaponised against the buyers it aims to help.
Once a reserve is publicly disclosed, it creates a clear target. A cashed-up buyer who sees value above the reserve can immediately lodge a pre-auction offer at or just above that figure – potentially locking out other buyers who were planning to inspect on the final Saturday, bring their parents through, or simply hadn’t yet made their decision.
Pre-auction offers happen today, of course. But early reserve disclosure will encourage them, particularly in a strong market where buyers spot value well above the stated reserve.
Furthermore, if an offer comes in more than three business days before auction, the buyer can still avail themselves of the cooling-off period – adding another incentive to move early and shut out competition.
And if a vendor decides to test multiple early offers rather than wait for auction day? The outcome is often a ‘highest and best’ scenario – the very process buyers despise. You submit your best price blind, with no idea what others are offering. Win or lose, you walk away regretful that you could have gone higher. The transparency of the auction system – its greatest virtue – is lost entirely.
Be careful what you wish for. Reforms designed to protect buyers could instead accelerate the shift toward opaque, non-transparent sale processes.
A practical alternative: vendor-funded building inspections
If the Government genuinely wants to reduce the financial burden on buyers, there’s a simpler mechanism that other jurisdictions have already adopted: require vendors to provide a building inspection as part of the marketing campaign.
Under this model, the vendor commissions a building inspection from a panel of approved inspectors at the start of the campaign. Interested buyers can access the report at no cost. Whoever ultimately purchases the property pays for the inspection as part of settlement. Buyers who miss out pay nothing.
This directly addresses the frustration of spending $500 to $600 on inspections for properties you don’t win. And because the inspector is drawn from an independent panel – much like valuers on a bank’s approved list – concerns about bias are mitigated. An inspector who consistently favours vendors will be found out quickly and removed from the panel.
Buyers who want their own independent inspection remain free to commission one. But the default would no longer require multiple failed bidders to each spend hundreds of dollars on the same property.
The adaptation game
Anyone who follows the AFL knows how this plays out. The league changes the rules to fix one problem, and the coaches find a way around it within weeks. Real estate is no different. Agents will adapt to work in their vendors’ best interests – because that’s their job. Buyers, in turn, need to adapt to protect theirs.
Legislation can raise the floor on conduct. It cannot eliminate the fundamental uncertainty of a free market where human emotion plays a starring role.
Take home message
Tightening the Statement of Information is sensible. Exploring vendor-funded building inspections would be genuinely helpful. But mandating early reserve disclosure – particularly with a seven-day minimum – risks creating more problems than it solves.
Vendors will be forced to set reserves before they understand their market. Buyers may find themselves blindsided by pre-auction offers that shut them out of the process entirely. And everyone will learn what experienced participants already know: knowing the reserve tells you nothing about what a property will sell for.
The auction system, for all its imperfections, remains the most transparent mechanism we have for discovering true market value. Reforms that inadvertently push more sales into opaque processes serve no one – least of all the buyers they claim to protect.
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