How To Set A Reserve Price - OpenAgent

Determining reserve prices can be tricky when it comes to selling a property at auction, which means you need an auction strategy to maximise your chances of selling.

You need to balance getting a high price to ensure you gain a decent profit while maintaining a fair price to get the bidding going, which can be a difficult balancing act. This makes getting your pricing right, and how the market behaves in response, important. First and foremost you need to be realistic when setting a reserve price and have a finger on the pulse when it comes to current market conditions.

This is where an experienced local estate agent can help, as they will have a very good idea of prevailing property prices and the latest sale prices in your suburb.

Let’s start by defining what a reserve price is.

What is a reserve price (meaning)?

A reserve price is the minimum amount - or bid at auction - you would be happy to accept for your property. You usually set the reserve price in consultation with your real estate agent, and then inform the auctioneer. Otherwise, it is confidential and is not made public or shared with the bidders at auction.

Once bidding starts and reaches the reserve price then your property is officially ‘on the market’ - it is just a question of how high bids go. If your reserve price is not met then you don't have to sell.

If your property fails to sell this is called ‘passing in’ in the auctioneers' trade. Sometimes if the reserve is not met, and you still want a sale, then the highest bidder can negotiate a final sale price with you. It is unusual not to have a reserve price, and most vendors choose to set a reserve.

Now let’s look at what you need to take into account when setting your reserve price for an auction.

How to set a reserve price: auction reserve price strategy

Before you set your reserve price you need to get an idea of what is happening in your local market, by developing an auction reserve price strategy using the following resources:

• Feedback from an experienced local real estate agent.
• Final sale prices for properties similar to yours.
• How much interest other similar properties are getting.
• How much pre-auction interest you are getting from interested buyers.

Now let’s look at your pricing strategy and the implications of setting a high or low reserve price.