Pat Igoeon how AMVs have failed - so far
It has been a torrid time in the auction rooms since September for many vendors and their estate agents. Come back good old sale by private treaty - boring and unglamorous but safe.
For most would-be buyers, pursuing a property at auction now begins with the estate agent's advised minimum value (AMV). AMVs effectively began life early this year and arose from a report to the Minister for Justice, Equality and Law Reform, Mr McDowell. They are offered as estate agents' true opinion of the value of property at the beginning of the selling campaign. They replaced the tired and very dog-eared "guide prices".
So buyers' back-of-envelope calculations now begin with the advertised AMV. But the new system, from which much has been expected, could hardly have got off to a worse start. Auctions have been floundering. The question now is whether AMVs have actually contributed to vendors' problems and made matters even worse.
Empty auction rooms in recent months attest that all is not at all well in the state of auctioneering. The contrast between the strong and weak markets in the first and second halves of the year is striking. After the September glut, buyers began holding back, partly encouraged by remarks by Mr McDowell suggesting that a change in stamp duty might happen, partly in the knowledge that something was happening in the market.
AMVs were perhaps being set at slightly higher than the old guide prices would have been, but vendors' expectations also seemed to soar even higher. For the first half of the year, buyers went along. But then, properties just stopped selling. Vendors were not happy to sell at buyers' prices and buyers were not happy to buy at vendors' prices. Auctions have just not been working. The danger now is that AMVs, which play a pivotal role in any auction sale, may become discredited even before they become enshrined into law. They are still in a legal no-man's land. Mr McDowell has promised that reform "is on the Government's legislative programme for 2007". But, with elections looming, the current Oireachtas's hourglass is fast emptying. If a recommendation last year to Mr McDowell as Minister for Justice, Equality and Law Reform, from a review group into the auctioneering industry is followed, AMVs will be enshrined into law as auctioneers' true opinion of the value of a property at the commencement of a marketing campaign.
The significance of "commencement" and, secondly, the relevance of the word "minimum" in the middle of AMV are unclear . . . and unsettling. Why not simply refer to Advised Value? The report also recommends that the AMV is to be the only price for the property to be published by the auctioneer. It allows for no changes as the marketing campaign continues. And it is recommended that AMVs extend to sales by private treaty.
Next year's promised Bill is expected to enshrine into law many of the 42 well-intentioned recommendations in last year's report. But, to restore stability and credibility to the Irish residential property market, it may be necessary for Mr McDowell to also look very closely at the basics, such as the AMVs, secondly, the seller's real and secret minimum auction sale price, the "reserve price" and, thirdly, at the law of property and estate agency.
In just one year, the new AMVs have enjoyed less than spectacular success. Part of the problem is that people are not entirely clear just what AMVs are and how the figures are reached. What people do know is that the AMV is not linked to the reserve price, which is fixed on auction day as the vendor's true minimum sale price. And so, buyers wrestle with the relevance and helpfulness or otherwise of the announced AMVs and muse on what the vendors really want for their properties on auction day. Many have clearly asked - why bother?
The Irish residential property market is valuable, all the more reason why it is important that the property market should not be allowed by the Government to drift. More than the credibility of AMVs is at stake. The proper operation of this hugely important market in the economy requires significantly increased transparency. Mr McDowell should know more than most the effect of a well-timed speech aimed at the property market. A signal that fundamental legal reform will be given priority before the Dáil and Seanad are dissolved next year would help. Without some urgent clarity, AMVs are unlikely to be of much help either to vendors or to purchasers. For the new year, sale by private treaty is likely to be a comforting fallback.
