The Difference Between a Guide Price and a Reserve Price
The reserve price is the minimum amount the seller is willing to accept for the property.
Unlike the guide price, the reserve price is usually confidential and is agreed between the seller and the auctioneer before the auction takes place.
A property cannot be sold unless bidding reaches or exceeds the reserve price.
For example:
- A property may have a guide price of £100,000.
- The reserve price might be set at £110,000.
- If bidding only reaches £105,000, the property will usually remain unsold because the reserve price has not been met.
- If bidding reaches £110,000 or more, the auctioneer should be able to sell the property.
Under current industry guidelines, the reserve price cannot normally be more than 10% above the published guide price.
This means that if a property has a guide price of £100,000, the reserve price would typically be no higher than £110,000.
The reserve price helps protect the seller from having to accept a price that is lower than they are prepared to sell for, while the guide price helps attract interest from potential buyers.
Top Tip: Even if bidding reaches the guide price, this does not guarantee the property will be sold. The reserve price must also be met before the auctioneer can bring down the hammer and confirm the sale.
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