Are AMVs any better than guide prices?

Talking Property: What use are 'advised minimum values' asks Pat Igoe, when houses are still selling well over the estimated price at auction.

Advised Minimum Values (AMVs) are the latest thing to hit the property pages. An AMV is given as an auctioneer's true opinion of the value of a property when it is put on the market.

But, just taking last week as an example, the AMVs already seem to be going the way of the discredited guide prices, many of which seemed more misguiding than guiding.

Sadly, house purchasers in particular continue to be bemused and, if gullible, to have their time and money wasted.

Three examples: Sherry FitzGerald sold 25 Newbridge Avenue in Sandymount, Dublin 4 by auction for €2,000,000, which was €500,000 more than its advertised advised minimum price (AMV).

Lisneys sold 35 Nutley Lane in Donnybrook for €3,660,000, which was no less than €1,160,00 above the price would-be purchasers were told was the "advised minimum price", while Collier Jackson Stops sold 124 Leeson Street Upper for €2,502,500, this time €802,500 above the AMV. These sale prices were 33 per cent, 46 per cent and 47 per cent respectively above the AMVs.

The nearest last week to what would seem a reasonable guide to would-be purchasers, for whom life in bullish markets is difficult enough, was unusually adopted in one advertisement, when Gunnes informed of a 'Disclosed Reserve' of €425,000 on 15 Cherry Grove in Walkinstown, Dublin 12. The hammer fell at €485,000, within reasonable distance at 14 per cent over the AMV.

It is now almost six months since the Minister for Justice Michael McDowell announced details of new regulations and a new authority aimed at stamping out certain practices by estate agents.

He noted that the existing legal framework, the Auctioneers and Estate Agents Act 1947, was "outdated, inappropriate and inadequate for the present-day market".

Mr McDowell was speaking on the publication of the report of the review group on the auctioneering industry, chaired by Alan McCarthy. He would be bringing forward legislation this year to establish an estate agents regulatory authority with monitoring and inspection powers.

The review group recommended that the only price that should be allowed to be published by an auctioneer, whether for sale by auction, private treaty or tender, should be an AMV being an auctioneer's "true opinion of value at the commencement of the marketing campaign" when selling a house.

So, significantly, we will have AMVs for private treaty sales as well if the review group's recommendation is accepted and included in the legislation.

But, unless practices change, the question will remain - given AMVs so far at auctions, what use are they, and how can auctioneers be so out of touch with their own market as to so often and so consistently underestimate house values?

Cynics suggest that the final recommendation of the review group could help if it is included in the proposed legislation.

This is the recommendation that auctioneers quoting percentage fees to vendors of houses must also give an indication to the vendor of the likely absolute amount they seek in fees and VAT, and, importantly, that this is to be based on the AMV. A reduced AMV will mean a reduced fee.

But an inaccurate AMV is just one aspect of serious consumer dissatisfaction with the domestic property market in Ireland.

So what else is there? First up is gazumping, an unpleasant practice where a vendor holds back after initially orally accepting an offer from a would-be purchaser, which has been creeping in here, and which is hardly the auctioneer's fault.

Despite reports, gazumping is not widespread and may become even less so if the market slows down.

Then there are the practices of sealed bids, unnecessary surveys on houses that are really out of reach, over-"puffing" of properties by auctioneers and general discontent that would-be buyers are not being treated openly and fairly.

It is not easy to be optimistic that the pending legislation will seriously come to the aid of the legions of house buyers and would-be house-buyers. First there is the anecdotal evidence. The legislation will be based on the report of the review group.

But the review group itself included the heads of the country's two main auctioneering bodies. One of them, the Irish Auctioneers and Valuers Institute, "warmly welcomed" the report, and indeed reportedly brought the AMVs to the table in the first place . . .

Mr McDowell is a leading figure in a political party that avows the virtues of the open market and competition.

But to be effective, any market and competition must be open and transparent and with a reasonable playing field between vendors and their auctioneers, on the one side, and the buyers and would-be buyers on the other.

With the forthcoming Bill, this may all be coming. Tightening-up on AMVs might be a good place to start.

Pat Igoe is a solicitor with a conveyancing practice in Dublin, who writes on legal matters for the Law Society Gazette