12 Jun 2018 By WengYee Loke
What is the difference between a guide price and a reserve price? For those unfamiliar with auctions, the different terms used can be confusing. Is the guide price the price the property will sell for? What does the reserve price mean in that case?
As a potential buyer, the guide price gives an indication of what the property is expected to sell for at auction. Of course this is just a guide and is not the necessarily the actual sale. The property could sell for less or more than the guide price depending on interest.
The minimum price at which the property will sell. The seller agrees the reserve price before the auction. The figure is confidential between the auctioneer and seller. If a property has multiple bids on it but still has not hit the reserve, the seller is not legally obliged to sell.
Few points about the reserve price:
The reserve price can’t be more than 10% of the guide price (and may often even be lower than the guide price). There may be times where the reserve is set low when the seller is motivated to sell.
With all of Bamboo’s online auctions, the seller can’t increase the reserve price once set (but they can decrease it). So there’s no fear of moving goalposts if the bidding is going well!
Property A has a guide price of £200,000. The reserve can not be more than £220,000 (£200,000 + 10%). It might even be lower.
Property B has a guide price of £150,000+. Same rule applies so the reserve should not be more than £165,000 (£150,000 + 10%).
Online auction: On our platform, we show this on the auction page. You will see either a ‘Reserve met’ (in green) or ‘Reserve not met’ (in red) indicator below the bid.
Ballroom auction: This is a bit trickier to tell when bids reach the reserve. You will have to keep your ears peeled for what the auctioneer is saying. They may or may not have different styles depending on whether the reserve has been met. If the final bid hasn’t reached the reserve then the auctioneer will have to say that unfortunately they are not able to sell the lot. If it has, then bidding goes on as normal with no ‘reserve met announcement’.
Remember that pricing at auction is very much dependent on supply and demand. You will be able to see the ‘real’ market value of a property at auction. If there is lots of interest in the same property, the property could go for far more than either the guide or reserve price. Nonetheless, the guide price can help you plan your finances and give you an idea of what the seller is looking for as a minimum figure.
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