How to sell at auction: Setting a reserve price

What-does-the-federal-budget-have-in-store-for-the-property-market_157_6012208_0_14100806_300Whether it is an investment property you have renovated, or a long-standing family home, the sales process can be a particularly stressful period of your life. One of the methods that is growing in popularity is selling by auction.

However, before you commit to selling your house in this way there are a number of things to think about – the reserve price is just one. Once the day rolls around you should have a clear understanding of what to expect, so here is a brief guide to help you through.

How does an auction work?

Selling your property by auction is a much different process than, say, advertising through private sale. An auction involves setting a reserve, which is the lowest level you are willing to sell your property for. A potential buyer then bids for your property against other bidders, until the minimum amount is met.

However, an auction can be a fickle beast. If the reserve is met or surpassed, buyers continue to bid against one another until the fall of the auctioneer’s hammer. But if the reserve is not met the property is passed in, allowing you the choice to either negotiate with the interested parties or reinstate the property on the market.

How do I set a reserve price?

A successful sale depends largely on how bidders are feeling on auction day, but there are many things you can do in preparation for sale. One of the most important decisions is pricing. The reserve is normally set on auction day or the previous day and sets a minimum price against which buyers will bid. This amount should be a balance – high enough to secure you a comfortable amount when sold, and low enough that it will not prevent bidding.

If you are in a hurry to sell, setting an achievable reserve can make the process much easier. While you want to make sure that the price reflects how much your home is worth, it should also be realistic based on thorough market research . Ultimately you can choose any amount you wish, but this is why it is so important to work with an experienced real estate professional.

In the weeks before auction, take the time to gather and analyse feedback you received during the inspection period to get a good idea of buyer sentiment. Your real estate agent is a fountain of local knowledge – they will advise you on comparable sale prices and similar properties in the surrounding area. Check over asking prices and eventual selling figures. This will give a good guide of what to aim for.

Be aware that the figure you and your agent decide on will be kept confidential – the bidders do not normally know the reserve before auction, as this can remove some of the competition.

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