Selling houses at auction - setting the reserve and guide prices
When selling houses at auction two sets of prices dominate proceedings: the reserve and guide prices.
Selling property at auction is more successful if potential bidders believe the guide price indicates a 'good value' lot. As its name suggests a guide price is just that – a guide. It lets bidders know what price the property is likely to achieve. Guide prices can also change right up until the auction itself. With the right marketing a lower guide price will attract the most interest.
The reserve price is the minimum price you’re prepared to sell the property for and is agreed in advance of the auction.
The bottom line: selling houses at auction requires a bit of courage for the best results. The lower the guide price the more interest your property will attract.
It is better form not to set the guide price lower than the reserve and for the majority of auctions this will be the case. On occasions however the reserve might turn out to be higher than a previously published guide price.
It is worth asking your auctioneer how they set guide prices. A few give their own definitions which you will find in the small print in the auction catalogue. For example, the wording in an Allsops’ catalogue is rather different from the wording in an Andrews & Jackson catalogue.
Guide prices are printed in the auction catalogue. But the reserve price is generally a confidential matter, between you and the auctioneer. You can expect the auctioneer to discuss a likely reserve price with you. The subject is likely to come up at the initial appraisal but you can if you wish set the reserve price just a few days away from the auction.
To make sure your house sells for way above the guide…set it low. This is central to the psychology of bidding.
Of course, this means that your reserve price will be correspondingly lower. But if you have done your homework and picked the right auction for your property this is not the leap of faith it might seem - particularly when you consider recent trends in the prices of auction property and the increase in the number of lots being sold. Selling houses at auction is not for everyone but do remember that demand for some auction property is extremely high.