Setting the reserve price of your property is about achieving a balance between what the market will be prepared to pay, the actual value of the home, and of course a number you are comfortable with. If you are working with a real estate agent, they will be able to assist of course, but ultimately - the final decision is yours.
So how can you go about settling on a price that will work on auction day?
Beware of setting the reserve too high
It can be scary to set your reserve too low as you may be worried it will sell for that amount, but the risk of putting it too high could be detrimental to the bidding and overall result. Why? Because sometimes those looking to bid wait until they know the property is officially ‘on the market’ (when the auctioneer lets everyone know the reserve price has been met) and if this doesn’t happen, it can completely stall bidding.
Read more: Why are there so many different prices when selling your home?
Make a decision early
It is best to not wait until auction day to set the price, as you should allow yourself some time to really settle on what you would be happy with. It is also good to be confident with the final number you go with before the adrenalin of ‘auction day’ kicks in.
If you find yourself ‘flipping’ and ‘flopping’ between a sale price - make sure you look at it from a logical point of view, with facts and research backing up your decision. This is one number that shouldn’t be decided upon due to emotional reasoning, as this doesn’t really stack up for those who will be interested in buying your home.
Research, research, research
It should go without saying that research is an important part of the process to set a reserve price for your property. If you are comfortable with letting your real estate agent do this for you - then that is okay.
But it really is a good idea to check out the market yourself - and this can involve everything from seeing what comparable houses are selling for in your neighbourhood (both by auction and set price), getting a wider view of whether buyers or sellers are currently doing well, and attending auctions (both onsite and in a real estate office). You may also want to employ a registered valuer to give you an accurate view of the value of your home.
Question your agent
Research includes asking your agent lots of questions so you can get find out what potential buyers think about your house. Ensure they are speaking to those who attend viewings to find out where they think the price point sits for the property.
After open homes, sit down with them to discuss:
- How many buyers came to see the property?
- What have other comparable properties locally sold for recently? (How many people showed up to their auctions? What was bidding like?)
- How many people are likely to show up to the auction?
- What comments have the buyer’s been making about the home?
- How interested have the buyers appeared to be? And what do they the home is worth?
What about ‘pre-auction’ offers?
You are allowed to consider pre-auction offers, and in a hot market, this can often be a common occurrence as people try to bypass the process of bidding against other interested parties.
This will also force you to think about what price you want for your home, but of course, you are going to auction for a reason - and you need to weigh up the pros and cons before going down either path.
Should you ‘vendor bid’?
This needs to be something you discuss with your real estate agent, or if you are selling privately - the registered auctioneer. While it is legal, there are a few conditions that must be met, so make sure you understand these before making this part of your auction plan.
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