Bidding for a home is a bit like buying off Facebook Marketplace – but worse

At an auction I went to recently, there was a small one-bedroom apartment listed for $550,000. The real estate agent told me that the owners were desperate to sell because they were going through a divorce. The highest bid on auction day was $590,000. Long before then, I had warmly congratulated the last man standing, who had been persuaded by the auctioneer to “go a little higher.”

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The next day, it was back on the market: Apparently the owners weren’t that desperate to sell, and had wasted the time of every bidder who came in, inspected the property, and did their research.

Then there was the studio with the $575,000 auction guide. “We were so shocked by this seller’s minimum price, he really wants to sell,” the real estate agent told me. Since I was the only bidder on the morning of the auction, I figured I could snag the property for a little less than the guide.

Instead, I spent an entire Saturday scrambling for crumbs before finally signing a real estate agent-written contract — only to receive a late-night text message: the equivalent of a Facebook Marketplace seller’s message saying they’d decided to charge more for that desk you decided to buy.

In this case, it was the agent who told me that the seller wanted more than the price guide.

Rinse and repeat; You can see how days and weeks of buyers’ time can be wasted in both markets.

This masthead’s research found that new “for sale” ads listed after a failed auction were sometimes more than $1 million above the previously listed auction guide. Clearly, in these cases, the initial auction guide was misleading.

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I’d like to blame real estate agents, but most of them are just playing games.

The general rule is that agents do not “know” their seller’s reserve price (the minimum amount they are willing to sell) until auction day. So most of the time, even though they have a very good idea of ​​how much their customers want to sell for, they still get away with it.

Stating an estimated price where the seller simply says they will sell at a higher price “may be deemed false or misleading under the Australian Consumer Law”. NSW government.

However, if real estate agents are not technically informed by that day, they may shrug their shoulders and say that they do not know their seller’s reserve price. Of course, most people still don’t reveal this on the day, meaning buyers for whom a property might be well over budget still take time out of their day to come along.

I’m lucky that I don’t have young children to care for or a weekend job to sacrifice to come, but it’s awful that so many people with these responsibilities are tricked into wasting valuable time.

Most often this is a bid made by estate agents to “generate interest” at auction (get more buyers to come, make it look like there is a lot of interest in the property).

It’s like someone inviting everyone who asks about an old toaster they advertise for $5 to come and buy it, then asking them all to bid before saying it won’t actually sell for less than $20.

Good real estate agents will give you an honest indication of the price range – if only with a wink and a nudge as they don’t need to tell you – but they are an extremely rare breed.

Most don’t particularly care how much time you spend.

That’s why we need better rules. A property’s auction guide should be changed when a real estate agent is told the reserve price. This should ideally be at least a week after the auction, but no later than the morning of the auction.

If the highest bid goes above the price guide but it doesn’t sell, this will raise a red flag with the authorities and a penalty (perhaps a fine) will be imposed on the real estate agent and seller.

Additionally, it should be obligatory for all real estate sales prices to be disclosed to the public. While there is an argument that this helps protect people’s privacy, not disclosing prices leads to a lack of price transparency: clear and accessible information from which customers can make their decisions.

Most undisclosed prices are for properties that sell for well below the expected price.

Often, the buyer of these properties will want to hide how little they paid so as not to diminish the value that future buyers of the property may see. Or the real estate agent will want to hide it to preserve the value people see in other properties they have sold in the area.

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Because property price guides are set in line with similar properties sold in the area, hiding low prices can lead to higher prices than we would normally see in the housing market. This lack of transparency in pricing leads to what we call an inefficient market: the prices of things sold do not fully reflect their true value, which means people pay too much for them.

Much of our real estate market problems stem from the simple economics of not having enough homes. But there are also clear problems with the way our properties are marketed, driving up prices and wasting people’s time.

While I have made many purchases on Facebook Marketplace with only the occasional misleading listing, I have yet to make one in our real estate market. At this rate, I’ll have all the second-hand furniture and appliances I could ever need without having a home to keep them in.

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