Auction reserves can sometimes be confusing in many ways for both the buyer and seller alike. Reserves are sometimes set prior to the auction, but what are they and what do they mean for the vendor and bidder. This post will explain auction reserves and how they are handled during the bidding process.
What are auction reserves?
Auction reserves are simply a minimum price that the vendor is willing to sell a lot for. The auctioneer is obligated to follow the seller’s instruction and cannot sell the lot below the reserve price.
Reserves can often be confused with estimates. At Hinter Auctions, we often include a high and low estimate for lots offered in our catalogues. Estimates are a guide only and should not be confused with a reserve.
How are auction reserves set?
Auction reserves are always set by the seller. Whilst often sellers seek guidance from the auctioneer for setting the reserve price it is ultimately their decision. The auctioneer is then obligated to follow the seller’s instruction.
Is the reserve disclosed to buyers?
Reserves are never disclosed to bidders prior to the auction. The exception to this is when the seller has instructed the auctioneer to disclose the reserve.
How do I know when auction reserves have been met?
When an auction lot has a reserve price set, the auctioneer is required to disclose:
- That the lot has a reserve price set (prior to bidding)
- That the lot is on the market as soon as the reserve has been reached (during bidding)
When the lot has reached the set reserve the auctioneer will announce that the lot is on the market and bidding proceeds. Some of the phrases that the auctioneer may use to announce that the reserve has been met are:
- Reserve is off
- It’s on the market
- It’s for sale
- You’re playing for keeps
- You’re bidding to buy now
If the reserve has been met or exceeded the vendor is obligated to sell to the highest bidder.
What happens if the reserve is not met?
If the set reserve has not been reached during bidding the auctioneer will either:
- Announce that the reserve has not been met and move to the next lot
- Pass it to the highest bidder.
Lots that have not met reserve can be purchased post bidding at the auction. The purchase price is the minimum reserve however buyers can submit an offer. Offers below the reserve price are submitted to the vendor for approval.
If the lot has been passed to the highest bidder they have the first right to buy at the auction. If the highest bidder does not purchase then the lot is open for purchase by other bidders.
The length of time a lot is available for purchase varies at each auction.
Please note that purchase of lots post bidding is still subject to buyers premium and applicable fees.