Victorian auction laws are set to undergo significant changes aimed at eliminating underquoting and ensuring transparency through mandatory reserve price disclosure. These reforms promise to level the playing field for homebuyers, particularly first-home buyers struggling in a competitive property market.
This Australian-first initiative requires real estate agents to publish the reserve price (which is the minimum amount a seller is willing to accept) at least seven days before an auction or fixed-date sale, with no changes permitted afterward.
What is underquoting and why is it a problem?
Underquoting is a deceptive practice where properties are advertised or quoted at prices significantly lower than the seller’s true expectations or reserve price. This tactic lures in more potential buyers, creating artificial competition that drives up the final sale price at auctions
Under current Victorian auction laws, sellers can set or adjust their reserve price as late as auction day, often leading to frustration and financial loss for bidders. The victims? Often young, first-home buyers who invest time and money in inspections, legal advice, and due diligence, only to discover the property was never within their budget.
As Consumer Affairs Minister Nick Staikos put it, “buying a home is one of the biggest financial decisions you are ever likely to make, and underquoting is dishonest, it is unethical, and it is cruel.”
Debate on publishing the reserve price
While the current law does not mandate publishing the final reserve price before the auction, this remains a point of debate in transparency reforms
| Position | Argument | Impact |
| Mandate publication of reserve price | Provides absolute transparency; eliminates pre-auction guesswork; ensures buyers do not waste time on properties they cannot afford. | May discourage vendors from bringing properties to auction; potentially leads to lower final sale prices if buyers know the ‘minimum’ price. |
| Status quo (no publication of reserve price) | Maintains the competitive tension of an auction; allows flexibility for the vendor; aligns with the nature of an auction as an open competitive bidding process. | Continues the risk of perceived underquoting and potential buyer frustration. |
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What does the law require regarding price?
The Victorian auction laws are focused on transparency around the process and the estimated selling price, rather than the final reserve price itself. Key requirements include:
- Statement of Information: For all residential properties advertised for sale, including those going to auction, the estate agent must prepare and display a Statement of Information. The Statement of Information must include:
- An indicative selling price or a price range (e.g., $500,000 – $550,000). The upper limit of the price range must not exceed the lower limit by more than 10%.
- The median selling price for the suburb.
- A list of three comparable sales (sold within the last six months and within 2km for metropolitan areas).
- Reserve price disclosure (pre-auction): While the reserve price isn’t advertised, the law requires that the reserve price must be set in writing before the auction commences. This is typically done by the vendor signing the contract of sale or a separate instruction form. The auctioneer must not offer the property for sale unless a reserve price has been set.
- Bids below reserve: The auctioneer is legally permitted to make vendor bids (bids on behalf of the seller) up to the reserve price. Once a legitimate bid meets or exceeds the reserve price, the property is “on the market” and must be sold to the highest bidder. If the highest bid does not reach the reserve price, the property is “passed in.”
Key changes to reserve price rules under the new Victorian auction laws
Starting mid-2026, once the laws are introduced to parliament next year, agents must:
- Disclose the reserve price publicly at least seven days prior to the auction.
- Update all marketing materials to reflect this price and cease using any outdated ads.
- Face potential bans on auctions if they fail to comply, effectively forcing more transparent sales processes.
The key objective of recent government action has been to ensure the indicative selling price in the SOI accurately reflects the vendor’s genuine expectation and the agent’s professional appraisal.
The reforms aim to enforce a stricter connection between the advertised indicative selling price range (the top limit of which is often referred to as the “estimated selling price”) and the final reserve price set by the vendor.
- Expert Tip
The contract isn’t set in stone until the hammer falls. You can negotiate specific contract variations before the auction starts—such as reducing the deposit to 5% or extending the settlement date. Get these agreed in writing beforehand so you bid on terms that suit you, not just the vendor.
Industry reactions to underquoting reforms and reserve price disclosures
While buyers’ advocates support the move, the Real Estate Institute of Victoria (REIV) argues it could disadvantage sellers by limiting their flexibility to achieve the best price.
REIV CEO Toby Balazs emphasised the need for balanced reforms that enhance transparency without undermining vendors’ rights. Agents like Nicholas West from Nelson Alexander noted that last-minute changes in campaigns or seller circumstances could complicate early reserve price reveals. He did not necessarily believe reserve prices needed to be published before an auction because much could change in the final week of a sales campaign.
Early signs of success? A recent Woodend home auction, the first to voluntarily disclose under the proposed rules, reportedly went smoothly, proving the system’s potential.
Common misconception about property auctions and auction rules
A common misconception is that the advertised “Statement of Information” price range is the reserve price. This is incorrect. The price range is an estimate, and the actual reserve price may be higher than the top of the advertised range, provided the range was established in good faith based on comparable sales and vendor instructions at the time of advertising.
Comparison of Victorian auction laws to other states
Victoria’s proposed 2026 law would make it unique in Australia by requiring public disclosure of reserve prices at least seven days before auctions. No other state or territory mandates advertising reserve prices to bidders.
Below is a summary of how other jurisdictions handle reserve prices, based on current practices:
| State/Territory | Reserve price requirements | Key notes |
| Victoria (proposed) | Mandatory public advertising of reserve price at least 7 days before auction; no changes allowed afterward. | Aims to combat underquoting; other states are monitoring for potential adoption.. |
| New South Wales (NSW) | Vendors must inform agents of reserve price in writing; kept confidential from bidders. | Ongoing round tables discussing underquoting reforms; may follow Victoria’s lead. |
| South Australia (SA) | Vendors must advise agents of reserve price; remains confidential to bidders. | Similar to NSW in confidentiality focus. |
| Australia Capital Territory (ACT) | No requirement to set a reserve price; if set, it must be in writing to the auctioneer and kept confidential until the property is “on the market.” | Emphasises written documentation when a reserve is used. |
| Queensland (QLD) | No requirement to set a reserve; if none is set, seller must accept the highest bid. Price guides for auctions are banned entirely. | Seen by some experts as a “healthier” approach, shifting onus to buyers for due diligence rather than risking misleading quotes. |
| Tasmania (TAS) | No requirement to set a reserve; without one, highest bid must be accepted. | Leaves sellers exposed if no reserve is established. |
| Northern Territory (NT) | No requirement to set a reserve; highest bid accepted if none is set. | Similar risks for sellers as in QLD and TAS. |
Other states, particularly NSW, are actively reviewing underquoting and may adopt similar transparency measures if Victoria’s law proves effective. Queensland’s ban on price guides represents a contrasting strategy, prioritising buyer research over any form of price indication.
Looking to buy or sell in Melbourne?
Whether you are looking to buy or sell, these upcoming reforms signal a massive shift towards a more transparent, yet legally rigid, property market.
As Victoria leads the nation with these “game-changing” laws, the margin for error is shrinking. Whether you are bidding or listing, expert legal advice is the only way to navigate this evolving landscape securely.
