What does ‘indicative selling price’ mean?

An indicative selling price is one of the most important ways in which potential buyers can find the right homes for their budget and that vendors can sell their home.

At risk of overstating its importance, an indicative selling price is a significant tool and driver in helping the real estate market to function, as having an awareness of a property’s value via the selling price helps the right people find the right home sooner.

Victoria is the only state in Australia where real estate agents are required by law to provide an indicative selling price (the estimated price or price range for which a home is expected to sell at auction or private sale).

You will often find an indicative selling price associated with a property listing on a portal or on physical marketing materials.

Victorian agents are required to provide an indicative selling price due to state underquoting laws that were introduced in 2017.

These were established to provide transparency between the industry and consumers and facilitate a healthier real estate market as a whole.

Underquoting is the practice of advertising a property for sale at a price below its actual value to attract more buyers.

This creates a competitive bidding environment at auctions, but can result in buyers being outbid by others who are willing to pay the true value of the home.

This can lead to frustration and impact the market’s ability to function properly, as potential buyers may not attend the right auctions for their budgets, and homes may be at risk of not being sold.

Ethical and transparent practices are important to ensure the housing market operates efficiently and effectively.

Real estate agents in Victoria must provide an indicative selling price for properties in a Statement of Information that must accompany any online marketing of the property and is available at inspections and auctions.

This Statement of Information lists comparable properties and attributes of the property for sale, on which the indicative selling price estimate is based.

An indicative selling price is generated by an agent who has on-the-ground experience of a local market, conducting inspections and auctions every week and who has a first-hand interaction with the property for sale (identifying factors that will increase or decrease the indicative selling price).

They can then come to a more nuanced selling price that is intended to attract interested buyers.

A reserve price is established by the vendor through discussions with their agent.

The reserve price represents the minimum price a vendor is willing to accept from private sale or auction.

If at auction no bids reach this reserve price, which is not usually made publicly known until it is reached, then the auctioneer will often pause the auction to discuss with the vendor whether or not they wish to lower their reserve price to hopefully increase the number of bids or whether or not they want to pass the property in, which means that the property has not been sold.

A reserve price may not be the same as the indicative selling price, however an agent may push for the two to be similar.

– BY REALESTATEVIEW.COM.AU