Setting the reserve price is one of the most difficult decisions your vendors will make during their auction campaign, so it’s crucial you take an approach that’s equal parts considered, empathetic and, most importantly, effective.
Every vendor’s circumstances will differ so it’s important you can adjust your reserve price instructions accordingly, while ensuring you achieve a premium result for your client.
Below are my top tips for generating maximum buyer interest, encouraging competitive bidding and achieving a top sale price.
- Schedule a reserve meeting two days prior to auction day
Setting a reserve price shouldn’t be rushed and it should always be done in person.
Ideally, you should set up a reserve meeting two days prior to the auction. While you’ve done this hundreds of times, it’s unlikely your vendors have and they may be nervous.
This is another opportunity for you to provide value and lead them through the process.
Setting a reserve price meeting 48 hours out from auction day also gives you time to prepare and complete any final negotiations.
If the reserve price is lower than expected, this will give you time to rekindle interest in the property and potentially engage buyers who may not otherwise have attended the auction.
If the reserve price is higher than expected, this allows you 48 hours to further educate the vendor on your pricing feedback, as well as giving you time to review any last-minute details and ensure that everyone is on the same page.
Importantly, it also allows time for the vendor to provide any final instructions, ask any last minute questions and provides time for you to answer them.
- Determine the appropriate reserve price based on the circumstances
There’s no one size fits all rule when it comes to setting a reserve price. Reserve price instructions can, and should, differ depending on the situation.
As agents and auctioneers our obligation is to ensure we generate the best possible price for our vendor’s property.
For example, if there is limited interest in the property, a higher reserve price may be necessary to increase the final sale price.
On the other hand, if there is a lot of interest, a lower reserve price may be appropriate to generate more competitive bidding and continue momentum.
Irrespective of the approach taken, it’s imperative to get to know your buyers well so you know the best course of action to take on auction day.
3. Ensure that all statistical evidence for the campaign is available
To make an informed decision about the reserve price, it is vital to have access to statistical evidence from the campaign. This will also help with any explanations you need to make to the vendor. This evidence includes:
– the number of enquiries,
– positive and negative feedback
– comparable property analysis
– the level of competition
– the price at which the competition will commit.
It is important for vendors to know how their marketing dollar has performed throughout the campaign, be it good or bad.
Reviewing this information will allow you and the vendor to make informed decisions about the reserve price, keeping in mind that instructions can and should differ according to varying scenarios.
4. Reassess original expectations and give an honest assessment of the campaign
The saying goes that ‘time changes things’ and it can certainly do that throughout an auction campaign.
The expectations you had at the start of the campaign may have changed come auction day.
It is paramount to reassess the original expectations for the property throughout the campaign, including how or why the initial position has changed.
This can help you determine if any adjustments need to be made to the reserve price to ensure you’re setting a realistic target for the auction.
This is the time to bear down on some of the more difficult or positive conversations you have had throughout the campaign. The positives, the negatives and honest pricing feedback must be given.
If you have missed the mark with your expectations, then you must take ownership.
However, good agents will always have a consistent feedback strategy throughout the campaign, advising the owners of the progress, be it positive or negative, the entire way through.
A vendor should never be negatively surprised on auction day, so ensure you qualify your buyers effectively so your owners are receiving reliable information.
*If a reserve price is amended on auction day, it is best practice to have the update in writing and signed by your Vendor(s).
If you require any advice on how to run an auction campaign successfully, please don’t hesitate to contact our team at auctionWORKS, www.auctionworks.net.au
