Understanding the Reserve Price in Property Auctions

When participating in a property auction, one of the key terms you’ll encounter is the “reserve price.” This is a confidential minimum price set by the seller, below which the property will not be sold. It acts as a safety net, ensuring that the property does not sell for less than the seller is willing to accept.

What is a Reserve Price?

The reserve price is typically set within the guide range and is usually no more than 10% above a single figure guide. It is not disclosed to the public and remains confidential between the seller and the auctioneer¹.

What Happens If the Reserve Price Isn’t Met?

If bidding does not reach the reserve price, the property is considered “passed in.” This means that the property has not been sold during the auction. However, this does not mark the end of the selling process. Here’s what can happen next:

Post-Auction Negotiation

The auctioneer may invite the highest bidder to negotiate directly with the seller immediately after the auction. This is a common practice, as there may still be an opportunity to agree on a sale price that satisfies both parties².

Property Withdrawal

If no agreement is reached, the property is withdrawn from the sale. The seller may choose to relist the property at a future auction with a different reserve price or pursue other selling avenues².

Making a Post-Auction Bid

Interested parties who did not bid during the auction or who wish to make a new offer can approach the auction team to submit a post-auction bid. If this bid meets or exceeds the reserve price, the property can often be sold under standard auction rules².

Key Takeaways

• The reserve price is a confidential minimum price set by the seller.
• If the reserve price is not met, the property may be “passed in.”
• Negotiations can occur post-auction between the highest bidder and the seller.
• Properties that do not sell at auction may be withdrawn or relisted.

Understanding the dynamics of reserve prices and the options available if they are not met can empower you as a buyer or seller in the property auction market. Always consult with your auctioneer or real estate advisor to navigate the auction process effectively.

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