Reserve Prices in Property Auctions

What Is a Reserve Price?

A reserve price is the minimum amount a seller is willing to accept for their property at auction. It represents the lowest price at which the Auctioneer is authorised to sell the property. If bidding doesn't reach the reserve price, the property remains unsold.

Reserve Price vs. Guide Price: Understanding the Difference

One common source of confusion for auction newcomers is the distinction between reserve prices and guide prices:

• Reserve Price: The confidential minimum amount the seller will accept
• Guide Price: A publicly advertised figure indicating the approximate value range where the seller might consider selling

While guide prices are published in auction catalogues and marketing materials, reserve prices remain confidential between the seller and the Auctioneer. The reserve price is typically set in the range of the guide price although this isn't always the case. Click for more information on “understanding guide prices in property auctions”

How Reserve Prices Work in Practice

During an auction, the Auctioneer will normally start bidding below the reserve price to generate interest.

Common Misconceptions About Reserve Prices

We often hear misconceptions about reserve prices, including:

• Misconception: The reserve price is always the same as the guide price.
  Reality: The reserve price is confidential and may be set at, above, or below the guide price.
• Misconception: Properties always sell at or near their reserve price.
  Reality: Competitive bidding can drive final sale prices significantly above the reserve price.
• Misconception: Reserve prices cannot be adjusted, they can be
• Misconception: If bidding doesn't reach the reserve price, the property can't be sold.
  Reality: Post-auction negotiations often lead to successful sales for properties that didn't meet their reserve price at the auction.

Post-Auction Scenarios Involving Reserve Prices

What happens after an auction often depends on whether the reserve price was met:

• Reserve met or exceeded: The property is sold to the highest bidder, contracts are exchanged immediately, and the buyer typically pays a deposit (usually 10%) on auction day
• Reserve not met: The property remains unsold and the Auctioneer will continue to market the property and will often sell it after the auction, on the same contract.

Working with Auctioneers on Reserve Prices

Professional Auctioneers play a crucial role in advising on and managing reserve prices:

• They provide market insights to help sellers set appropriate reserves
• They manage the marketing and bidding process to maximise the chances of reaching the reserve

At Allsop, our experienced auction teams work closely with sellers to establish realistic reserve prices that protect their interests while attracting serious bidders. We also help buyers understand the auction process, including the role of reserve prices, to ensure they can bid with confidence.