The 85 times Melbourne home sellers wanted more money than they told you

At least 85 Melbourne home sellers set their reserve price higher than the top of the advertised price range on their properties in 2024 – sometimes hundreds of thousands of dollars more, analysis of auctions attended or contacted by this masthead in a year-long auction tracking project shows.

The practice is not illegal, but experts say it causes frustration and mistrust among buyers and discredits the real estate industry. Analysis shows it is routine even in a weak housing market and more than two years after the Victorian government launched a $3.8 million taskforce to crack down on underquoting.

It can also leave buyers paying for building and pest inspections for homes they never had a chance of buying.

Agents in Victoria must list properties for sale with a single price or a quoted price range, which must be based on their estimated selling price for the home or what they know the seller is willing to accept for a property. In an auction, the amount a seller will accept is known as a reserve price.

It is common for sellers to decide on a reserve on auction day. If an agent knows the reserve during the sale campaign, they must not advertise the home with a guide lower than that price.

The analysis tracked 337 auctions over the course of 2024, often seven to eight a week, chosen because they were likely to be interesting and competitive. Price guide, vendor expectations and sale price were recorded. Although property sale prices are public on settlement, there is no public database of reserve prices, which leaves it to agents to choose whether to disclose this.

The biggest gap between a price guide and a reserve at an auction recorded by this masthead was $460,000 for a prestige Toorak sale.

In Avondale Heights, a vendor’s reserve was $165,000 above the top of the guide and another in Doncaster East was $100,000 over.

Of the 337 auctions, 61 agents said the reserve was a figure higher than the range, in 18 cases the home was called on the market above the range, and six times the home passed in at the top of the range or higher.

Another two times the home passed in and was relisted for a figure higher than the first range.

There were 171 auctions where the reserve was within the range or on the market in the range, and 78 with incomplete data. Just one had a reserve below the guide.

This masthead is not suggesting these properties were underquoted.

Underquoting can occur in Victoria when a property is advertised at a price that is less than the estimated selling price, is less than the seller’s asking price, or has already been rejected by the seller. But it is difficult to prove.

A Victorian government review into underquoting, announced in 2022, made the point that there is no obligation for the estimated selling price of a property and the vendor’s reserve price to be the same. The results of the review have not been released.

John Keating, the owner of Keatings Real Estate and an outspoken critic of underquoting, said allowing vendors to set reserves higher than the price guide encouraged deceptive conduct.

“The legislation is fundamentally flawed because vendors can change their reserve price at any time before the contract is signed without penalty,” he said. “The laws should be changed to have vendors be guilty of breaking the laws too. They can work in cahoots with the agent to underquote and get off scot-free.

“That is blatant and misleading and deceptive conduct. It’s just bringing the whole system of real estate into disrepute.”

Keating said vendors should be made to advertise their homes with a set price they were willing to take.

Real estate agent John Keating is an outspoken critic of underquoting,Credit: Eddie Jim

“Despite the legislation to stamp out the illegal underquoting, it’s still rife,” he said.

This masthead asked Consumer Affairs Minister Nick Staikos whether buyers were frustrated by higher reserves than guides, if he supported a law change to compel reserves to be within a guide price range, and whether he would release the 2022 underquoting review publicly.

He said: “Underquoting is deeply unfair – and that’s why the work of the underquoting taskforce is so important.”

Staikos said taskforce members regularly attended auctions to remind agents there were penalties for wrongdoing. Laws passed in March will increase the maximum penalty for underquoting to $47,422.

Consumer Affairs Minister Nick Staikos with Premier Jacinta Allan last month.Credit: Wayne Taylor

“Recent laws passed will help protect Victorians – with increased fines for underquoting offences and mandatory training for estate agents and property managers,” he said.

Melbourne first home buyer Corey Taylor and his partner recently made an offer on a two-bedroom West Brunswick apartment that had a price guide of $590,000 to $630,000.

They offered $620,000 to the selling agent.

“The first thing he said to me was, ‘The seller is probably not going to be interested in anything lower than $630,000’,” said Taylor, a 33-year-old sound designer.

Corey Taylor recently made an offer on an apartment.Credit: Justin McManus

“And in my head I was kind of like, ‘Well then why the f--- is the price guide starting at $590,000?’” he said.

“Why is it not $630,000 to $650,000?”

The couple made an offer at the top of the range and it was accepted – at first. Then Taylor was invited to attend a competitive Zoom auction.

“The first couple of minutes they went way above the asking price,” he said. The home sold for $680,000.

Real Estate Institute of Victoria interim chief executive Jacob Caine knows from personal experience that sellers may shift their expectations during a campaign and blindside agents by setting a high reserve on auction day. He once ran a sales campaign for an owner who then adjusted the reserve price up by $600,000 – so he went and told potential buyers in the crowd.

“I absolutely agree that buyers can be and should be frustrated when they find that a reserve price has been set above the advertised range. There’s an enormous amount of effort, emotion, time and sometimes money that’s invested into trying to find that home to purchase by the buying public,” Caine said.

“I don’t think it’s widespread. I think it’s the exception rather than the rule.”

Home sale reserves in Melbourne don’t reserves do not need to be within the advertised price guide.Credit: Joe Armao

He thought the sample of the auction tracking project was problematic, and he said auctioneers only call properties on the market when they feel the bidding is done and dusted.

He supported any government review of the topic, but was not convinced Victorians were comfortable with mandatory publication of reserve prices or any ruling that reserves must be within guides.

Dr Peyman Khezr, a senior lecturer and auction researcher at RMIT University, said the practice was widespread because it helped build competition on auction day and create higher final sale prices for vendors, although he backed Victorian rules requiring listings to include a statement of information and comparable sales.

“When you set the price reasonably lower than what your reserve is, you attract more people to your auction, you will heat up the price at auction,” he said.

“It results in people acting … let’s say crazy or irrational in these circumstances, but what matters to the seller is that [this method] gets better prices, and that is why they keep doing it.”

Khezr said vendors should not be made to advertise a reserve, but that they should be made to set a reserve within the price guide instead.

Chamberlain Property Advocates’ Wendy Chamberlain said price guides were “works of fiction”.

“If an agent correctly prices a property, buyers will add on 10 per cent on top of it [because of the expectation of underquoting],” she said.

“So agents can do the right thing but it doesn’t always do right by their vendor.”

Opposition consumer affairs spokesman Tim McCurdy said many buyers were frustrated when the reserve price was set higher than the guide, and called for better training for agents, although he noted it was up to the vendor to set the reserve.

“It would also enable agents to understand the direction the government is heading in if the review is made public,” McCurdy said.