A reserve price is the minimum price the vendor will accept at auction. It is set confidentially by the vendor before auction day — often in consultation with the selling agent — and is not disclosed to buyers. If bidding does not reach the reserve, the property is passed in and does not sell at auction.

How Is a Reserve Price Set?

Vendors typically set the reserve price based on recent comparable sales in the street and suburb, the agent’s appraisal of market value, the vendor’s own financial position and minimum acceptable outcome, and current market conditions (clearance rates, buyer demand, days on market). A well-priced reserve is set at or close to the likely selling price — too high and the property risks passing in, too low and the vendor risks leaving money on the table.

What Happens When a Property Is Passed In?

When the highest bid does not reach the reserve, the auctioneer announces the property is passed in. The highest bidder has the first right of negotiation with the vendor immediately after the auction. These negotiations are often successful — many passed-in properties sell within hours or days of auction. If negotiations fail, the property returns to market as a private sale.

How Can Buyers Use Reserve Price Signals?

While the reserve is confidential, buyers can estimate it from: the agent’s price guide (which in Victoria must be within 10% of the agent’s estimated selling price under the Australian Consumer Law), recent comparable sales, the vendor’s campaign strategy (longer campaigns with price reductions suggest a higher reserve than the market will bear), and clearance rates in the suburb.

Frequently Asked Questions

Can the reserve price change on auction day?

Yes — vendors can adjust the reserve price right up to auction day, and even during the auction in some states. If bidding is stronger than expected, the vendor may lower the reserve to ensure the property sells under the hammer.

Is the price guide the same as the reserve price?

No. The price guide is the agent’s estimated selling range, which must be within 10% of their genuine assessment in Victoria. The reserve is the vendor’s minimum acceptable price. The reserve is often set at or above the top of the price guide, though in competitive conditions it can be lower.

What is a vendor bid?

A vendor bid is a bid made by the auctioneer on behalf of the vendor to move bidding toward the reserve. Vendor bids must be clearly announced as such. They are legal in Australia but only permitted before the reserve is reached.

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