How to activate a Reserve Price at Auction, the right way!

A Reserve Price is a mechanism that’s there to help generate a successful (the highest) sale price for the vendor. And although a successful result often hinges on how it is handled, so many vendors still get it wrong. And it costs them.

Time and time again I see and hear of home sellers activate or initiate their Reserve Price the wrong way. The definition of a reserve price is “the price stipulated as the lowest acceptable by the seller at auction”. This is true to a point, however if a reserve price is set, cultivated and activated correctly it will achieve the highest price for the home seller.

Firstly, where I see home sellers get this wrong is by setting their reserve figure or price far too high. Vendor Marketing’s definition is: “A reserve price is designed to release your auctioned property to the market once it has been reached or surpassed ONLY under competitive bidding with momentum”.

Where I see both agents and home sellers get this wrong is by initiating or activating it when there’s no momentum in the bidding. In other words the bidding labours up-to the reserve price.

The correct setting of a reserve price allows competitive bidding up-to this point and from there should be treated as a trigger point or trigger price to move the bidding from point A to point B.

Therefore Reserve Price A (RPA) should only be activated after it has passed this point with competitive bidding that has momentum, or that flows in a speedy manner.

At auction, if the RPA is not activated this usually means there have been no bids received or the bidding has laboured up-to this point and therefore the reserve price should not be initiated or activated. In other words an auctioneer should pass the property in and deal exclusively with the highest bidder.

This is where a Reserve Price B comes into play. An agent or auctioneer has no right to sell the Property at the Vendor’s RPA if the property has passed in at Auction. Through negotiation a good agent or auctioneer will now truly earn their money by pitching the property at a higher price point and negotiate a successful price and outcome for the vendor. A price that the vendor is ultimately happy to sell for – nothing less.

This is why I see home sellers fearing the auction process. Because they do not truly understand how the Reserve Price is designed to benefit them and assist in achieving the best price.

The right tactic is to see the Reserve Price as something that will work for you, for a successful outcome. It’s not just a signpost that the property’s on the market.

Truth be known, it starts right from the beginning. Knowing the true value of your property to begin with enables you to get your strategy right and correctly set the reserve price.

Vendor Marketing – Melbourne’s most qualified vendor advocates, specialises in both property marketing and agent selection for property sellers within Melbourne. We are highly qualified to tailor the strategies around setting your correct reserve price and then ultimately maximising your sale price!