Setting Your Reserve
Setting the reserve price – the minimum amount you’re willing to sell your property for at auction, is one of the most important decisions you’ll make during the sales process. While the auction itself can create healthy competition, it won’t override market conditions, which is why having a smart reserve strategy is critical to achieving a successful result.
What is a reserve price exactly?
Your reserve is the lowest figure you’re comfortable accepting. Once bidding reaches this number, the property is officially “on the market” and will sell to the highest bidder. Any bids beyond that point are added value – effectively bonus dollars. If bidding falls short, the auctioneer may pause the auction to allow negotiations between the vendor and interested parties.
Key Factors to Consider When Setting Your Reserve:
1. Buyer Sentiment
Strong auction results often stem from competitive bidding between emotional buyers. It’s important to gauge interest levels during your campaign – are there passionate or motivated buyers in the mix? Your agent’s insights from open homes and enquiries will help assess how far buyers may be willing to go.
2. Agent Feedback
Your real estate agent is on the frontline of the campaign. They’re interacting with buyers daily, handling questions, receiving offers, and hearing objections. Their feedback – including both enthusiasm and hesitation from potential purchasers is crucial when setting your reserve.
3. Offers and Market Movement
If you’ve received pre-auction offers or consistent feedback during the campaign, it’s essential to take these seriously. Be careful not to let emotion cloud your judgement – a reserve that’s significantly above market sentiment may block a sale. Remember, market conditions can shift over a few weeks, so factor this in when deciding your final number.
4. Realistic vs. Risky: Finding the Right Level
Setting your reserve too low can be risky. Once a property reaches reserve at auction, it must sell to the highest bidder – even if that figure falls short of your expectations. On the other hand, setting a reserve too high can deter a sale altogether, particularly if buyers feel the property is priced beyond fair market value.
One key advantage is that the reserve is confidential – buyers don’t see the number, so setting a higher reserve won’t directly scare them off. But internally, you need to align your reserve with actual buyer behaviour and not just your ideal outcome.
5. Strategic Timing & Flexibility
Contrary to common belief, you don’t need to finalise your reserve right before the auction begins. Many vendors set theirs a few days prior, after discussing all available feedback with their agent and auctioneer. Keeping communication open is essential, and you should prepare for various auction-day scenarios. Your reserve doesn’t have to be fixed in stone – it can beadjusted before bidding begins if needed.
Ask Yourself These Questions Before Finalising Your Reserve:
- What are buyers actually saying about the home?
- What price ranges have been mentioned in feedback or offers?
- What figure are you realistically prepared to accept after a full marketing campaign?
- Does this reserve reflect true market sentiment – or is it wishful thinking?
Ultimately, the value of your property is determined by what the market is prepared to pay. Setting a fair, market-aligned reserve gives your auction the best chance to generate strong bidding and produce a premium result. A well-prepared reserve strategy – based on real data, professional advice, and genuine buyer interest – positions you for success on auction day.