Underquoting reforms: good intentions, practical problems

The Victorian Government has signalled significant reforms that would require vendors to publish their reserve price at least seven days before an auction.

In this week's episode, Jarrod McCabe and Jordan Telfer explain why this rule – while well-intentioned – clashes with the commercial reality of auction campaigns, and why a published reserve rarely provides the price certainty buyers crave.

In this episode Jarrod and Jordan discuss:

• The campaign conflict: Why locking in a reserve before the critical penultimate Saturday leaves vendors pricing their assets with incomplete data
• The transparency risk: How early disclosure creates a target for pre-auction offers and opaque 'highest and best' scenarios
• The ‘Certainty’ Fallacy: Why knowing the reserve price offers little protection against competitive emotional bidding on the day
• A better solution: The case for vendor-funded building inspections to reduce buyer costs without distorting the auction mechanism.

We enjoy providing you with free insights into the Melbourne property market and property investment more broadly. Thank you for listening. 

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Investing in property makes sense.  Investing in the right property takes knowledge.

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Episode Transcript

(00:06):
- Hi everyone.
Welcome to Episode 112
of the "Rewarding PropertyDecisions" podcast.
Well, it feels a bitlike Groundhog Day today.
After last week's under quoting podcast,
the state government went on
to make some further announcementsjust after I'd recorded.
So I thought, well, bestthing to do is to come back
and have another chat about it.
So they're now proposing torequire real estate agents

(00:29):
and vendors to disclose whattheir reserve price will be
about a week out from the actual auction
or conclusion of expressionof interest date.
So I don't want to rehash everything that,
that I spoke about last week
'cause it's time consuming
and you don't need to to do that.
You can go back and listento last week's podcast.
But I did want to gothrough the pros and cons

(00:49):
around these legislation changes,
and there are some really good parts,
but there are some parts
that I think need some furtherdiscussion and some further,
probably some changes.
Whether or not that'll happen or not,
we'll wait and see.
So I've asked Jordan Telfer to join me.
Thanks for coming, Gordo.
- No worries at all.
Pleasure.- So before we get into this,
I thought we could point out
that the proposal is stillvery, very much in its infancy

(01:11):
and it's was not,
it's just as a discussionpoint at this stage.
- It's a bit more than a thought bubble.
And we sort of, we spokeabout this during the week.
Do we address this now?- [Jarrod] Yeah.
- Do we not, do we wait until legislation
actually is presented toParliament and goes through?
But I think that what we came to is that,
look, there's enough detail out there,
and in terms of what thegovernment direction is,
where they plan on taking it.

(01:32):
But I think it's worth, eventhough there will be changes
and amendments, and it will be polished,
and a few rough edges taken off.
There will be a bit more nuance to it.
- Correct.- But it's been put out there,
it's certainly out there forwide discussion this week
amongst the industry, certainly.
Yeah, we thought it well worthwhile to-
- To go further to address it?
Yeah.- Yeah.

(01:53):
- So we thought we'd giveyou some of our thoughts
from both a pro and conperspective for buyers,
but also from a vendor'spoint of view as well.
But I thought to start with,
what I'll do is just giveyou a bit of an overview.
I'm not going to gothrough the press release
that the government put outbecause it's quite wordy
and I mean, there's a lot of guff in there
that we don't need to talk about.
But I'll just highlight acouple of the points here.

(02:17):
So, to many young Victorians and families
that are wrestling with Saturdays
and attending auctions on a Saturday,
chasing the dream ofhaving a home on their own,
only to have the rugpulled out from under them
and the house sell for a lotmore than the advertised price.
The Allen government's got ongoing work
to stamp out illegalpractises of underquoting.

(02:38):
They're introducing Australian-first laws
that will be introduced next year,
requiring real estate agents
to publish vendors reserveprices ahead of an auction
or a fixed date sale.
So let's go, I guess to the start of that,
and this is probably the biggest issue
that we've spoken about,
and I think that needsthis further discussion,

(02:59):
is that this idea thatdisclosing the reserve a week out
is going to automaticallymake it a lot more easy
for vendors,
for buyers, sorry, goingthrough the buying process.
Because they're going to knowwhat the reserve price is,
they'll know whether ornot they're in the fight
to buy that property.
- Mm.- Which I think

(03:20):
is very misleading.
- It is.
'Cause ultimately it'sbeen said many times,
it's the vendor's reserve,
for a a property that's in high demand
could be set at $1,000.
- [Jarrod] Yeah.
- The market will decidewhat it's worth ultimately.
So I understand that purchases
might see a little bit morecertainty there for them

(03:42):
in that, "Oh, well, okay,this is the quote range,
"but this is the reserve.
"We're not there."
"Okay, then we won't go aheadwith the building inspection.
"We won't get our contract check.
"We'll concentrate on other properties."
- [Jarrod] Yeah.- "Okay."
But if this is designedto try to, you know,
make it fairer and allow people

(04:05):
who may not have had an opportunity
to purchase a particular property,
to give them a bit more of a rails run,
I think that they're goingto be a bit disappointed.
- Well, I mean, how many auctionshave you walked away from,
whether we've beenactively trying to buy it
for a client or not,
and you've walked awayto go back to the car
and heard the generalmutterings of the crowd saying,

(04:28):
"Oh, they've paid way too much for that.
"That property was,
"that's not worth anywhere near that."
And that's the thing.
It's in the eye of the beholder.
You can have two or three people
that think it's worth a hell of a lot more
than what you think it's worth
and hell of a lot morethan what the vendor
might think it's worth.
- Yeah.- And therefore,
all of a sudden the property'sbeen quoted at one to $1.1m,
the reserves declared at $1.1m,

(04:50):
and it sells for $1.35m.- Mm.
- And that's, I think, the thing
that you can't legislate against that.
And that's why we have auctions.
- Yeah, yeah.
I think that they've tried to,
in concurrence with these changes
to the disclosure of the reserve.
They're also,
they, being, sorry, the government
and particularly in the hands

(05:11):
of the minister of ConsumerAffairs to see this through,
tightening up on thestatement information-
- Yeah.
- At the same time now-- Which that's,
and again, that's another thingthat we want to talk about.
That's a good thing.
- It was necessary.- Yeah.
It's been treated as a joke-- Yeah.
- The last couple of years.
The Statement of Information being,
the document that'srequired to be provided
to give prospective purchasesan understanding as to

(05:36):
what sales have been looked at
in support of the quoterange that's been advertised.
- Yeah.
- They're tightening up on that
because it's basically, yeah-
- Well, at the moment theStatement of Information
is there to justify the quote,
not to justify the value of the property.
- Sort of reverse engineer.
- Yeah.- And some of the,
some of the comparable sales,
comparable with-- Laughable.

(05:57):
- Are laughable, they're just not.
And others that arecomparable that we know about,
we've been through-- Yeah.
- They haven't even been used.
So that's well and good.
I mean, it does beg the question as to,
well, how far shouldagents be expected to go
to do the homework in a wayto benefit the purchaser?
- Yeah.
- They're representing the vendor.
It's the purchasers thereto do their own homework.

(06:17):
That's another-- Another discussion.
- That's another discussion.
But that, if they're going to have it,
it needed to be tightened up.
And that I think is a good thing.
- Yeah.
- The main issue though,being the requirement
that a vendor's reserve is disclosed
at least seven days before thedate of, let's say auction.

(06:39):
- Yeah.- Okay.
Let's take out of it theexpression of interest campaigns
and all that-- Just for now.
I mean, it's the same.
- It's a set date.- It's a set date.
So it's a week out from that.
But the auction's probably
where this is mostly targeted anyway.
- It is, and this is what Ithink if we drill down on this,
this is where the,
it's the timeframe which isthe issue more than anything,

(07:00):
I think.- Yeah, yeah.
- The seven days, andinterestingly enough,
and I'm presuming hasn't been misquoted,
but Nick Staikos, theminister for Consumer Affairs
has been quoted as saying
that "A property sales campaignis typically four weeks.
"So it means the vendors have a few weeks
"to properly assess the levelof interest in their property.
"Seven days is a good amountof time for prospective buyers

(07:21):
"to make a final decision."
A property sale campaign, and let's,
in his mind, he'sthinking, auction campaign.
- And that is a mistake, though.
I mean, this is where thedetail becomes important
in these things-- It does, yeah.
- And I think sometimesit can be glossed over.
And again, I come back to thatpoint of this is early days,
and so we're justputting things out there.

(07:42):
But it is important,the detail around this.
So it's a hell of a lot of property
doesn't sell via auction.
It's a sale campaign then.
But underquoting is anissue with auctions.
- [Jordan] Mm.
- And expressions of interest.
So let's call it that.
- An auction campaign.- Auction campaign.
- And it might sound like we'rebeing pedantic about that,
but from a propertyperspective, it's important.

(08:03):
- Because a sale campaigncould be a private sale
that takes six days orit could take six months.
- Yeah, and that's why you have it-
- Yeah.- In that form.
- Yeah.
But what I zoned in on is"typically four weeks,"
well, it's not a four week campaign.
And this will come to the point,
it's a four weekend campaignfor a typical auction.
So you have your, let's let's say,
let's use this an example.
The typical campaign over October,

(08:27):
Saturday this year,
Saturday the 4th of October
would be the first open for inspection.
- [Jarrod] Yep.- Sure, it's uploaded
the Thursday prior, two days beforehand.
But the doors get open for the first time
Saturday, 4th of October,
second weekend, Saturday the 11th-
- [Jarrod] Yep.- 18th,
auctioned on the 25th.- [Jarrod] Yep.
- Between the fourth and the 25th,
there's three weekends, four weeks.
That's-- So other way around?

(08:48):
Three weekends, three weeks-- Four weekends.
Three weeks.
- Yeah.- Yeah.
That's important because if we're,
if under this proposal legislation,
the vendor must disclose their reserves,
at least seven days before auction-
- Yeah.- That means it's at,
no later than in that instance of, say,
using that October campaigntimeline from say, this year.

(09:13):
It would require that tobe disclosed on the 18th.
- Yeah.- So on the third,
on, or before the thirdweekend of the campaign.
- [Jarrod] Yeah.- Realistically-
- And it's very specific in there
that it's got to be atleast seven days beforehand,
is what they're saying.
Now, at least seven days beforehand
means that if your auction

(09:34):
is going to be at 10o'clock in the morning-
- On the 25th.- On the 25th,
which a lot are,
then you will not as the vendor and agent
get to see what's goingon on the 18th of October.
Which is probably when you,
if you've ever sold property
or been involved inthe sale of a property,

(09:57):
it will be instilled in youfrom the start that, that last,
that second last Saturday is vital
as part of your campaign.
Because it's when a lot ofbuyers make their decisions.
- Yeah.- They'll come back
to do their final inspection,
they'll bring family and friends back.
They'll make the final decision around,
yes, am I committed or am I not?
And a lot of that info,
and they'll come in through the property

(10:18):
at midday on that Saturday,and they'll walk out the door
and the agent will say,"What do you think?"
And they'll say, "Oh, we justneed to talk to our family
"and friends over the weekend.
"We'll talk to you next week."
And the agents do all theirphone calls on a Monday,
Tuesday, usually on aMonday to try and wrap up
so that they're in a positioncome Tuesday, Wednesday,
to sit down with their vendor

(10:38):
and advise them as towhat they're going to do.
- That being that... weekleading into their auction.
- So to say that they'll know
or they'll have a goodidea is just not right.
The amount of times that,
and sometimes you won'teven know come the Thursday
or the Friday,
that people will make decisions.
And I guess, get thatthat's not always the case.

(11:00):
And that if we want todo this, you've got to,
if you're going to discloseit, there's no point
in just disclosing it on the day
because that defeats the purpose.
And we'll get to other reasons.
But a week out is a hell of a lot,
is a hell of a lot earlier
than what vendors would really need.
- Mm, it is.
So that effectively allows the vendor,

(11:21):
setting aside midweekopen for inspections,
where these days, there'snot a lot of activity
on a Wednesday and Thursday.
You don't get a line onhow your campaign's going
from the two or threepeople that come through
during a midweek inspection.
So effectively you're looking at,
for somebody looking toauction on the 25th of October,
for instance,
they first open for inspectionon the fourth, the 11th,

(11:42):
and then before that next Saturday 18th,
they've got to have advertised,decide on the reserve,
and advertise it.
And it's just too early.
Decisions can't be made properly.
- And we've discussed this too,
I mean, a lot of acampaign to sell a property
is that you've got a general idea.
If you're in this city andyou are selling a property

(12:02):
that's got reasonablenumbers and comparables,
you've got an an idea
of what your property's going to be worth.
But part of it is to use that campaign
to formalise what your property's worth-
- Mm.- And to get
a clear understanding.
And two Saturday inspections,which is basically
what the vendors will be asked to do,
two Saturday inspectionsis not enough time

(12:23):
to clarify exactly what the expectation
from the buying public is going to be,
and what they're saying theproperty's going to be worth.
It's just going to leave you short.
- And I think what gets forgotten too
is that there seems tobe a two dimensional idea
as to what a property, amarketing campaign is about.
It's oftentimes taken from the perspective
of it's about advertisingyour property here,

(12:46):
I'm putting this toyou, pool of purchases-
- Yeah.
- And it's almost a staticresponse from the vendor.
It's not,
it's a two-way street.
And the vendor, as you say, Jarrod,
might have in mind what theythink their property is worth,
but it's also an educationprocess, the marketing campaign.
Sometimes vendors can bequite genuinely thinking

(13:07):
based on the comparablesales that they're aware of,
that their agent has advised them about.
They might have in mind,look, my property's worth
around $1.1m based on sales, A, B, C.
- Yeah.
- They could be absolutely inundated
on the first open for inspection.
The feedback on theMonday is very positive.
People might be asking for contracts,
"Can I get the building inspection done?"

(13:28):
You know, "Is the vendoropen to pre-auction offers,"
blah, blah, blah.
Okay, we may not jump at that,
but you get your secondweekend if the same feedback,
gee, we've got to lift it,
we've got to lift the quote.
- Yeah.- Really.
So we're not misleading people,
but equally we're seeingplenty of campaigns
where the vendor mightthink my property is worth X
based on A, B, C sales,
and it's crickets at thefirst open for inspection.

(13:50):
And then the second openfor inspection confirms
that we've got to reduce this quote,
otherwise we're not going to sell.
We've got to meet the market here.
- And then before you evenget to do the third you've-
- You've got to set your reserve.
- Set your reserve, it's just...
Anyway, so, and I mean,I had one two weeks ago
where I walked through on,I think it was a midweek
and they'd had the previous Saturday.
And I went there thinking,
"Oh, this looks pretty goodvalue, given this quote,"

(14:12):
and went through.
And I said to the agent as Iwalked out, "How's it going?"
And he said, "Ugh," he said,
"Every person that walkedthrough on Saturday,
"we had 50 people through."- Mm.
- "Every person that walkedthrough told me that I was,
"before they'd walked through,
"as they walked in the front door,
"'Oh, you're underquotingthis, this is way too light.'"
And I think he said theyhad 50 groups through
and over 40 walked out and said,
"No, it needs too much work."

(14:34):
And so the quote wasthere to reflect the work,
but it photographed really well,
because it had been nicely done up,
but the floors were very uneven.
And then once you got there, you could see
other bits and pieces.
And so there was going to bea fair bit of work to be done,
but the photos didn't show that.
And so once people walkedthrough, they got the full appeal.
So the, the quote was actually right.

(14:54):
- Yeah.
- But looked as though it was cheap
because it was a good size house
that presented quite wellin a really good street.
- Yeah.- Anyway.
So I think, so looking at it
from a buyer's perspective though,
and there's some good positive parts to it
and obviously having some certainty,
you made a really good pointat our meeting during the week
around the building inspection process,
and the option of what wethink could help in that.

(15:17):
Because one of the big thingsthat buyers are critical of
and this was mentioned inthe statement of information,
is spending money on properties
that they're not realisticallyin a chance to buy.
And I'm not sure if this was your idea.
I think it was something thatyou said you'd seen around,
but do you want to just gothrough that in terms of the idea
of having a building inspection provided?

(15:37):
- Yeah, well that was,
I mean, it's not anoriginal idea from my part.
Not at all.
People have thrown up a way to eliminate
and reduce some of thefrustration from buyers
of spending five, $600for a building inspection
on a property that they maynot have the budget for.
And it's a learning process.
You've got to do your homework.
Sometimes you just got togo to auctions, miss out,

(15:58):
and understand, well,I've got to recalibrate.
- [Jarrod] Yeah.
- I've got to increase my budget,
or I've got to look atsomething a bit different.
But it's been posed,
and there's no discussionwith these proposed changes
that the vendor,
as in I think otherjurisdictions around the country,
actually, the vendors required

(16:19):
and they advertisedtheir property for sale
through a campaign,
is to have a buildinginspection actually undertaken-
- Yep.
- To provide interestedparties for basically no cost.
- Yep.
- Then the idea could be,
well, whomever purchasesthey can then purchase that-
- Well, they have to buyfor, they have to pay for it.
- They have to pay for it.

(16:40):
- Yeah-- If there's any
number of ways of doing it,
but I think just to have a,
just to eliminate that cost-
- I think that one wasgood though, because it's,
and the concern then is,
oh, if the vendor was payingfor the building inspection,
whose interest is the buildinginspection being done in?
Well, if you have a panelof building inspections,
it's a bit like us beingfrom a valuation background,

(17:00):
there was always a panel of values
that people could choose fromor banks could choose from.
In this instance, there's apanel of building inspectors.
You choose one and that's produced.
If you are not,
if the building inspector'snot doing the right thing
by the buyers, it's goingto get found pretty quickly.
So they've got to be doingit on the right basis,
on the right, because there'sgoing to then be a contract

(17:20):
between the two.
And then whoever successfullybuys the property,
if they've used that building inspection,
then they pay for it andthe others don't have to.
- Yeah.- But, and that sort of takes
that risk out of it.
And if you want-- It's takes time as well.
- It does,
and if you want your ownbuilding inspection done,
because you don't want to take that,
then you've got every rightto go and do that too.
But you'll pay for it.

(17:41):
So that would take that uncertainty away
and take that risk of,
and yes, okay, the argument will still be,
"Oh, well I still have to goout and pound the pavement
"and do all that sort of thing."
Well, you can take that out too
if you're prepared to pay for it.
And again, I hate soundingself-serving on this podcast,
but if you want to havesomeone do that for you,
you can pay for that as well.

(18:03):
But if you want to save yourcost, which a lot of people do,
and a lot of people loveproperty in Australia too,
which is a really good thing.
And if you want to go out and inspect it,
then you can do that too.
So there's ways and means around this.
But I think the other thingthat we've spoken about
around the concerns andthe things that buyers
probably need to be alittle bit cautious around,

(18:24):
is that one of thediscussions that we've had
is as soon as a reserve isdisclosed in this sort of manner,
it will open it up to buyerscoming in and going, whack!
"I'm putting an offer down at that level,
"or maybe even slightly above."
And that can trigger things going forward.
Now, how they're going to handle offers
is something that probablyneeds to be discussed

(18:45):
because that's, I think something that,
I mean, if you are as a vendorprepared to put out there
that this is my reserve,
or you're a legislator to put out there,
"This is my reserve."
You should then have the right to,
"That's my reserve at theauction next Saturday.
"I'm disclosing it so that you'll all know
"for when you turn up next Saturday,
"that that's where thereserve is going to be.

(19:06):
"But it also means I'm notaccepting an offer before then
"because I want to have my day.
"I want to have my day in the sun,
"and my day in the sun is next Saturday.
"That's the reserve. Youcome along and you bid.
"I'll be prepared to sell it at that,
"but I'm not preparedto sell it beforehand."
- Mm.
- Now you might be preparedto sell it beforehand
and you should be able to choose that too.
- Yeah.
- But buyers need to be aware

(19:28):
that if that's disclosedand if they are prepared to,
then the worst fear for a lot of buyers
can then become a reality.
And the worst fear for a lot of buyers
is a undisclosed, non-transparent process
of highest and best.
- Yeah, and that, as youpointed out earlier, Jarrod,
that that could happen today.

(19:50):
- Yeah.- And somebody puts an offer
in a pre-auction offer thatis solid enough for the vendor
to say, "Yeah, I accept it."
- Yep.- And properties
are sold the time prior to auction.
I think though that this will just-
- Could encourage it more.- It will,
it will definitely encourage it more,
because once that,
there's more of a certainty around

(20:11):
what the vendors going to,
is prepared to acceptonce this is legislated.
- Yeah.- And that,
let's say it's that, you know,
one to $1.1 million quoted property,
vendor, reluctantly or otherwise says,
"Okay, well I've only seen acouple of open for inspections,
"but alright, my reserve'stop of the quote range 1.1."
In their minds, peoplewill understandably say,

(20:32):
"Well, okay, that's what you accept?"
Bang, "I'll give you 1.1,
"I'll give you a bit more than that-"
- [Jarrod] Yep.- "Just to sweeten the deal,
"so to speak, put a bit of icing on it."
And there's a bit more certainty,
it'll probably encouragemore pre-auction offers-
- Especially if people see value
well and truly above the quote price.
- Particularly in a strong market.
- Or reserved price, yeah.- Yeah, in a strong market.
And that'll bring it to a head.

(20:54):
They'll also be encouragedto do so as they are,
they've got the opportunity and the right,
and the legislated rightat the moment is for
like, if that's put down ona Monday before the auction,
you're still outside ofthe cooling off period-
- Yeah.- Oh, sorry.
You can avail yourself of that cooling,
three-day cooling off-- Yes.
- Because you are outside of three days
prior to the auction.

(21:15):
And so that's another little sweetener
and another, not a sweetener,
but another motivation, I suppose,
for people to try to bring it forward.
Perhaps blindside other buyers-
- [Jarrod] Yeah.
- Who haven't had the opportunity,
who haven't got theirminds around, haven't seen,
they wanted to get mom and dad through-
- Or are planning to do their inspection
on that last Saturday-- Yeah.
- But the reserve's beingdisclosed on the Saturday morning,

(21:35):
they don't get to look at ituntil the Saturday afternoon
to make their final decision, and bang!
There's an offer.
- Yeah, so again, that's where purchases
could find themselves.
Well, be careful what you wish for.
- Yeah.- Because you may be,
you may be locked out an opportunity
if somebody jumps ahead of you.
And if they do and you are prepared,
and you've had yourbuilding inspection done,

(21:55):
you've got your contract,
and you're sure that thisis the property for you.
"Yeah, I know I can buy it at that."
The agent and the vendor can,
they decide how thatproperty's going to be brought
to a head.- Yeah.
- It might be boardroom auction.
Great, you got yourtransparency as you would
if you were standing outsidethe front of the property
on the day of auction.
But they all may also decide,this is the highest and best.
- Yeah.
- So what are you prepared to put out?

(22:16):
- Where are you going to go?
- And-- Yeah.
- That is a total blind situation
that nobody-- No one enjoys it.
- Nobody enjoys it.- No, no, and no.
And you never walk away feeling
whether you buy the property,
you sort of walk away, "Oh, should,
"did I pay too much?"- Yeah.
- If you miss it, more oftenthan not in that scenario,
people aren't prepared toput forward their highest
because they are worried.- 'Cause it's pretty hard.

(22:36):
- Yeah, so they'll putforward and then you miss it
and you think, "Oh, Icould've gone higher."
So you lose the transparency.
- Yeah.- So yeah,
there's a lot to this.
- Yeah.- And I mean,
we've had a lot of chats about it
and then every day we probablythink of something new
and a different scenariothat could play out.
So it'll be really interesting,
but I spoke to a coupleof people last week

(22:57):
and one of the interesting things,
whether I use the AFL Coaches' analogy,
I mean, the rules get changedin the AFL all the time
with the best of intentions
to try and fix a part of the game.
And the coaches are masters.- Mm.
- And they'll just work a away around it.
And they find anotherway to do what they need
and then the AFL has to change something.
The same thing's going to happen,
that real estate agentswill find a way around

(23:19):
these legislation changes
to work in their vendors' best interests.
- Mm.
- And it's up to us whenwe're representing the buyers,
is to find ways to help our buyers
to get the best resultpossible for them too.
And if they want to do it themselves,
then they need to do thatsort of thing as well.
- Yeah, yeah, yeah.- Yeah, yep.
- Is there anythingelse you wanted to add?

(23:39):
- No, look, I don't think so.
I mean, there are acouple of other questions
that people had that I've read that,
and either coming from agents as to,
well, what about this, whatabout that, what about that?
That I think are pretty easily addressed.
I've had a couple of peoplesuggest during the week,

(23:59):
"Well, what about situations
"where you've got an agentwill have a difficult vendor,
"so to speak, if there'sthree or four parties to it?"
- Yeah.- "Or if it's a divorce,
"and that can be acrimonious-"
- Trying to set the reserve.- Trying to set the reserve.
- Yeah.
- You're going to have a difficulty
a week before or on the daily auction,
the number of timesthat during the auction,
two parties can't agree-

(24:20):
- In a lot of a divorceor a deceased estate
where there's multiple beneficiaries,
there'll have to be asworn valuation done.
So they'll probably have thereserve in a lot of those set-
- Yeah, that's true.
- Before the campaign even starts.
- Yeah.- So, yeah.
So I mean, there's queries around that,
but sometimes I think real estate agents
are asking questions totry and make an argument
when in actual fact there's not really,
there's not a really concerning argument

(24:42):
with the legislationthat's being proposed.
I think sometimes it's just anargument for the sake of it.
- Yeah, yeah.
So I think in my, I think in our eyes,
my eyes, it's probably more that,
the issue with this seven days,
minimum seven days,
is it just doesn't allowenough time for vendors
to get a feel for the market
and where their reserve should be set.

(25:03):
But also it can open acan of worms for buyers
if they find themselvesafter only two inspections-
- Not being able to make a decision.
- Not being able to make a decision.
Somebody's jumped thegun, offered the reserve,
and they find themselvescut out of the process
because they haven't hadenough time themselves
to do their due diligence,

(25:23):
let alone actuallydetermine, is this for me?
- Yeah.- Have I seen it-
- I think, but the biggest thing, Jordan,
the biggest thing with all thisis that setting the reserve
and disclosing it is not going to stop
a runaway auction result-- Ultimately, yeah.
- It's just,
just because you know whatthe vendor's expectation is,
doesn't mean you'll know
what every other buyer'sexpectation is there.

(25:44):
- [Jordan] Yeah.- And people see value
at different levels,
so the vendor might beprepared to sell it to you
at a price that you are happy with,
but if there's two or three other parties
that are prepared to pay them more,
they've got every right toexpect that, and to want that.
And the auction processallows them to do that.
- Yeah.- And so
just because the reserve's disclosed
and it's within your budget
doesn't mean you're going tobe able to buy the property.

(26:04):
- Yeah, yeah, exactly.- Thanks everyone.
Thanks very much for joining us.
Thanks, Gordo.
That's been a good chat.
That's Episode 112
of the "Rewarding PropertyDecisions" podcast.
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