Do I have to set a reserve price?

What a reserve is

The reserve is the figure you are willing to let the house go for on the day. Below it, the auctioneer cannot sell. Once the bidding reaches it, the property is on the market and the next bid buys it.

Setting one is the usual course, not a requirement. Where an auction is run with no reserve, the property sells to the highest bidder at whatever that bid is, and there is no point at which the auctioneer can decline to sell. That is a deliberate decision to make with your agent rather than a default.

You set that number. The agent and the auctioneer will give you their read of the registered bidders and the feedback from the campaign, but the decision is yours and it is recorded in writing before the auction starts.

It is normally set late

The reserve is usually set shortly before the auction, often that morning, once the campaign has run and you know who has registered to bid and what they have said. Setting it early commits you before you have the information the campaign was run to get.

What the reserve controls

• Whether the property sells under the hammer. If bidding stops below the reserve the property is passed in and moves to negotiation instead.
• When vendor bidding stops. A vendor bid can only be made while the reserve has not been reached, and never at or over it. Once the bidding passes the reserve, every bid has to come from a genuine buyer.
• What the auctioneer can announce. The auctioneer tells the room when the property is on the market, which is the point the reserve has been met. That announcement changes how people bid.

Setting the number

A reserve is not a wish. It is the price at which you would rather own the house than sell it. Two things should inform it: the written appraisal your agent gave you, which under rule 10.2 of the Client Care Rules must realistically reflect current market conditions and be supported by comparable information on sales of similar land in similar locations, and what the campaign has told you about the buyers in front of you.

If your agent could not find directly comparable or semi comparable sales, rule 10.3 says they must explain that to you in writing. That is worth knowing before you fix a reserve, because it means the evidence behind any number is thinner.

If you do not want an auction

A reserve belongs to auctions. A deadline sale has no reserve: offers come in by a stated date and you accept, counter or decline. A priced campaign has no reserve either, only the price you advertise and what you are prepared to take.

Either way, the number you will not go below is better decided before the campaign starts than under pressure on the day.