What is a Guide Price?

When you are buying a property at auction you want to know that the property you are buying is priced correctly. In other words you want to be sure you’re not getting ripped off! Auctions are supposed to be somewhere you can bag yourself a bargain, not somewhere you go to get the wool pulled over your eyes.

Similarly if you are selling a property you want to know you are going to get a decent price. It’s all very good the buyers coming and getting a bargain but what’s in it for you? A quick sale yes but is that really worth being £40,000 out of pocket? No of course it isn’t. This is why auction properties have guide prices.

What is a Guide Price?

A guide price is the price the auction house and the seller think the house should go for. The house will be surveyed and viewed by estate agents and the seller together with the auctioneer will combine this information and come up with a guide price for the property. However you may be fooled by this price so there are a few things to bear in mind.

If you were trying to sell fruit from a stall and you wanted passers by to bid for it you wouldn’t get very far if you put a price tag on it that was clearly too expensive. Passers by wouldn’t bother stopping if they thought the price you were advertising was far too high. And the same applies to the housing auction. If you receive details of the housing auction and the houses listed all seem pretty expensive you may decide to give it a miss. This is where the auction house and the seller get cunning.

The Low Guide Price

Guide prices are, intentionally, set low. This is done to attract the interest of buyers. It is hoped then that as more and more people are interested in the property because the guide price is so low a bidding war will begin and the price will start to creep up. The buyers get interested because they think they’re on to a bargain and yet before they know it they’ve paid £50,000 more than they intended!

The seller can’t lose because as well as the guide price there is a reserve price. The reserve price indicates how high the bids have to be before the property can be sold. So while the guide price may be £100,000 the reserve price could be £150,000. Until the bids reach £150,000 the property won’t be sold. So if the guide price got people interested but no one was willing to meet the reserve price the seller just keeps his or her house until the next auction!

Buyers should beware of the guide price and remember it is intentionally low and could be nowhere near the amount you would have to pay to claim the house. Always set yourself a realistic spending limit and don’t exceed it.