The auction reserve is the lowest price at which a seller is willing to sell. It is the seller's decision and is usually set close to auction day after considering comparable sales, the agent's estimate, competing listings and genuine campaign feedback. The reserve is not the advertised range or a guarantee of value. Set it as a defensible decision, then agree exactly how the auctioneer should seek instructions if bidding approaches it.
Know what the reserve does
The reserve price protects the seller from being required to sell below a chosen minimum at the auction. If bidding reaches the reserve and the property is offered for sale, the highest bidder can secure it subject to signing the contract. If bidding does not reach the reserve or another price the seller accepts, the property may be passed in or withdrawn.
The reserve should be treated as a real instruction, not a marketing phrase. It represents the point at which the seller is willing to exchange the property on the displayed contract terms. It is different from an agent's estimated selling price, an advertised price guide, a formal valuation and the seller's hoped for result.
Separate the key price concepts
The agent's estimated selling price must be reasonable and take account of the three most comparable property sales. It appears in the sales authority and may be expressed as a single figure or a range of no more than 10 per cent. If it becomes unreasonable, the agent must tell the seller in writing and update the authority.
The advertised price must follow Victorian price advertising rules. If the seller gives the agent a reserve or asking price during the campaign, the property cannot be advertised below it. Advertising also cannot be below the agent's estimate or a written offer rejected as too low. The reserve itself is commonly set on auction day and may differ from the advertised position.
Build an evidence pack before discussing the number
Start with relevant settled sales, not the broadest suburb results. Compare property type, land, accommodation, condition, location, outlook, parking and any legal or planning factor that buyers may value differently. Recent listings and passed in results can add context, but asking prices do not prove what buyers paid.
Ask the agent to explain why each comparable is useful and where the subject property is stronger or weaker. If a formal value is important for another purpose, consider an independent registered valuer. A market appraisal and an auction reserve serve different functions and neither should be represented as a guaranteed sale result.
Use campaign feedback without mistaking noise for evidence
As the auction approaches, examine who has inspected, returned, requested the contract, obtained advice and indicated an ability to bid. Repeated comments about one feature may explain resistance, but casual opinions do not set the reserve. Give more weight to actions that show preparation and to offers made on clear terms.
Ask the agent to classify buyers by readiness and explain any gap between early appraisal evidence and live campaign response. If the agent's estimate has changed because it is no longer reasonable, that change must be addressed properly. The seller should not be surprised by a new price conversation in the final minutes before bidding.
Account for the seller's actual position
The reserve is personal to the seller because it determines whether they are willing to contract, but it should still be informed by evidence. Consider the outstanding loan, selling costs, purchase commitments, settlement timing and the realistic alternative if the property does not sell. Do not build a reserve from the amount needed for the next property without testing whether the market supports it.
If there are co owners, trustees, attorneys or other authorised decision makers, confirm who can give binding instructions and whether everyone agrees. Resolve this before the auction. A disagreement during a pause in bidding can create pressure and confusion when the auctioneer needs a prompt answer.
Write an auction day instruction plan
Record the reserve through the agency's required process and confirm who may change it. Discuss what the auctioneer will do if bidding is well below, close to or at the reserve. The auctioneer may pause and seek instructions. If the seller agrees to sell at the current or a higher bid, the property can be declared on the market.
Also discuss permitted vendor bids. A vendor bid is made by the auctioneer on the seller's behalf to advance bidding when the displayed rules allow it and must be identified. It is not a genuine buyer offer and should not be used to disguise the bidding position. Dummy bids are illegal.
- Confirm the reserve and authorised decision maker.
- Agree communication during any auction pause.
- Set expectations for vendor bids and bid increments.
- Define the first negotiation position if the property passes in.
Plan the consequence of holding the reserve
A reserve has value only if the seller is prepared for the property not to sell below it. If bidding stops short, the auctioneer must first invite the highest genuine bidder to negotiate. Decide in advance which changes to price, deposit or settlement could be considered and when the property would move to private sale or come off the market.
Marketing expenses and the auctioneer's fee will generally still be payable if the property does not sell, although agent commission generally is not. Include those consequences in the decision. Holding a reserve may be completely reasonable, but it is not cost free or outcome free.
Get advice on the contract, not just the price
This page provides general information only and is not legal, financial or valuation advice. The seller should have a Victorian legal practitioner or licensed conveyancer review the contract, disclosure, deposit and any special arrangements. The agent and auctioneer can provide market and campaign evidence, while the seller makes the final reserve decision.
Questions sellers ask
When is an auction reserve usually set?
The seller commonly sets it close to auction day after reviewing comparable sales, competing listings and the actions of prepared buyers. It remains the seller's decision. Record the reserve and confirm who can change the instruction before bidding begins.
Is the reserve the same as the advertised price guide?
No. The reserve is the seller's auction minimum; the agent's estimated selling price and advertised figure have different functions and regulatory rules. Once a seller gives the agent a reserve, price advertising cannot be below it.
Should I set the reserve from the amount I need for my next home?
Your financial position matters to the decision, but it does not determine what buyers will pay. Test the proposed reserve against comparable sales and current campaign evidence, then obtain financial advice separately if the next purchase depends on a particular net amount.
Can the seller change the reserve on auction day?
The seller controls the acceptable price and can give revised instructions through the agreed process. Decide in advance who is authorised to do that, how the auctioneer will communicate during a pause and what the seller will do if bidding remains below the chosen figure.
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