Don’t be reserved when setting a reserve
The auction to sell your house is around the corner and you’re struggling to set the perfect reserve price. But setting this price isn’t a simple process so take a deep breath and ensure you have plenty of time to manage this decision. It could mean the difference between selling your property under the hammer – or not.
Let’s start at the very beginning….
Your reserve is the lowest price at which you’re prepared to sell your property. You’re looking for the ideal sales price which will have you, as the vendor, celebrating with plenty of cash in your hip pocket. At the same time, your reserve shouldn’t soar so high that it discourages bidders from putting up their hands.
Whatever figure you decide on, remember it won’t be advertised and it’s always confidential. Even when a bidder asks for the reserve – and rest assured, someone always does! – your auctioneer won’t reveal this information.
How should I set my reserve?
Aim to be objective and logical. Yes, this can be hard especially if you’re selling a family house you’ve lived in for 20 years or an apartment you and your spouse bought together and spent your post-wedding period in.
Answer: talk to your agent and auctioneer. They’ve gone through this process dozens of times and can tell you how much interest there has been in your home during the marketing campaign as well as local buyer sentiment. They may well know of several passionate buyers keen to snap up your house at auction.
Also, do your research on what similar homes in your area are worth and attend nearby auctions. Make your initial reserve decision a few weeks before the big day but factor in potential changes as the market can change during your marketing campaign.
Last but not least, think about your personal situation. Do you have to obtain a quick sale? If so, are you prepared to possibly sell for a lower price than you’d like? Give your final verdict on your reserve in the final few days before your auction.
Do I have to set a reserve?
Short answer: no. But it’s a risky business.
If you decide to head in this direction, your house will sell to the highest bidder, regardless of how high (or low) their bid is. As such, it’s always best to set a smart reserve before auction.
On the other hand, not setting a reserve can sometimes result in a great sale as the possibility of no reserve can increase interest and see multiple bidder hands simultaneously. But if you’ve never sold a home at auction before, it’s recommended you stick with setting a reserve.
On auction day
While auctioneers can’t reveal the reserve price to bidders, they may let people know when bidding has hit this price. After doing this, you may see bidding jump ahead or slump, depending on your figure. Some bidders who haven’t yet raised their hands will immediately do so when they know the property is on the market.
Bidding which doesn’t hit the reserve might see your house not selling under the hammer, otherwise known as passed in. If this happens to you, don’t despair. Everything is definitely not lost with plenty of homes selling in post-auction private negotiations between the highest bidder and your agent.
But it is crucial to remember that if your reserve price is met, you may have to accept that price – and that price only – if no further bidding materialises.