The “reserve price” is the minimum price that the vendor will accept. This is set by the vendor prior to auction and can be changed by the vendor during the auction if desired.
Whilst there is a common fear of setting the reserve price too low if you take the time to make your decision this shouldn’t occur. Remember, the reserve price isn’t advertised anywhere and is confidential.
In Queensland, you can legally make a decision about the reserve price anywhere up to the auction day. It is best to do this well prior to the auction so you use your head rather than make an emotional decision. Avoid changing your mind without evidence to back your decision up. You should be looking to try and make the decision as logically and unemotionally as possible prior to the day of the auction.
How setting a reserve price can affect the outcome of the auction
Setting a reserve price is partly about your personal comfort level but also partly about how a high, low or predictable reserve price may affect the bidding activity on the day at auction. It is best to listen to your agent’s perspective and utilise the information they have been collecting about your property during the marketing campaign.
Things you should consider are:
- How many buyers have been through to see the home
- Any offers you have already received, both verbally and in writing, How much were the offers for?
- What have other comparable properties locally sold for recently and how many people showed up to their auctions?
- How many people are likely to show up to the auction?
- What comments have the buyers been making about the home?
- What comments have buyers been making about the home?
Attending local auctions is a worthwhile pursuit as you can get an understanding of when they are ‘on the market’ and a close margin as to what the reserve price is.
If there are few buyers and not much interest in your local area, then it’s time to discuss your options with your real estate agent.