A reserve price is described by law as:
A price below which the auctioneer is not allowed to sell the property.
The reserve price must be in writing, signed by all the sellers and given to the auctioneer before he is allowed to start the auction.
The law was written this way to protect sellers, so they don’t unintentionally sell their property for less than they really want.
But how do you decide what price you set the reserve at?
Think of a reserve price the same way you would think of an asking price.
If you were putting your property up for sale and you had to set a price you advertise it for, that’s probably your reserve price. And just like any Asking Price, a reserve needs to give you room to negotiate.
So, if the bidding reaches a figure that you are happy to accept but it’s still below your reserve, you are not stuck. You can tell the auctioneer you are varying the reserve, and the auction can carry on.
The law was written to give you flexibility. You can make decisions when you know what the bidders have bid.
Most importantly, you don’t need a low reserve to make an auction fire.
If the right buyers are there on the day and the auction is allowed to start where bidders feel safe bidding, they will be focused on each other and bid to win the property. It’s when an auctioneer interferes too much with the natural flow that auctions struggle. That has nothing to do with your reserve.
Author – Stephen Jackson
