Can I Set a Reserve Price?

Most people attend house auctions to get themselves a bargain. If you’re lucky there’s the chance to come away with a property worth a lot more than you paid for it! For the seller there is the chance to sell their home quickly and with little fuss. For lenders who have repossessed a property and want to get rid of it as quickly as possible this is a very appealing prospect. However while sellers are drawn to auctions because of the speed of the sale and the efficiency involved they don’t want to make a huge loss! And that is why they can set a reserve price.

What Is A Reserve Price?

A reserve price is a price set by the owner of the property that is the minimum amount the property can sell for at the auction. Sellers know people come to auctions for bargains so they would take this into account but they also do not want to let their property go for a ridiculous figure. They therefore set a reserve price and if no offers are made above this price the property isn’t sold. If this is the case the owner may try another auction house or have the house go up for auction again at the same auction house but review and possible lower the reserve price.

Is It Different From A Guide Price?

Some people get confused between reserve prices and guide prices. A guide price is separate from the reserve price. A guide price is used to attract buyers to the auction. It gives the buyers an idea of how much the house will sell for. Guide prices can be deceiving though as they are usually set much lower than the seller intends to sell for. This is done to attract buyers. If many buyers get involved in a bidding wart for the property the price could shoot up considerably.

Sellers set a reserve price to make sure the property doesn’t go for too little. So while the guide price might make it seem that the house could go at a bargain cost the reserve price is in place to make sure the seller doesn’t lose out too much. The seller does not have to inform the buyers what the reserve price is before the auction.

How Do I Set A Reserve Price?

When setting a reserve price you do not want to go to high. Of course you want to make sure you get a good deal but there is little point putting your house up for auction and then setting an extortionate reserve price. If it doesn’t sell you’re left out of market after paying the marketing costs!

Get an idea of what the house is worth from a surveyor and talk to local estate agents who will help you set a price. The auction house will also advise you on a good reserve price that will protect you but also give you a chance of getting a sale.