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The 'Guide Price' and the 'Reserve Price' are critical concepts to understand when buying at auction,

Publish Date: 09 July 2024

By Jade Shrubsole

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Top Ten Tips for Buying a Property via Online Auction.

Properties that were sold at auction later sold private treaty

When buying a property at auction, both the guide price and the reserve price are critical concepts to understand:

Guide Price

• Definition: The Guide Price is an indication of where the reserve is set and not necessarily what the auctioneer expects the property to sell for.
• Purpose: It helps buyers gauge if the property is within their budget and whether they should consider bidding. If you can’t afford the guide price you have little chance of buying the property.
• Nature: The guide price is not fixed and can change as the auction date approaches. It is an indication as to where the reserve is currently set. 
• Example: An auctioneer may think he can sell a property for £300,000 but if the vendor is happy to set the reserve £100,000 less than this, the auctioneer can guide it at less at £200,000! The result is that that a lot of people then think it’s a great deal, they do a lot of due diligence but are then surprised when the property sells for £300,000.

Reserve Price

• Definition: The reserve price is the minimum price that the seller is willing to accept for the property. It is a confidential figure known only to the auctioneer and the seller.
• Purpose: It protects the seller from having to sell the property at a price lower than they are willing to accept.
• Nature: The lower the reserve the lower the guide price, hence a Lot may receive a lot of interest.
• Example: If a property has a reserve price of £300,000, the property will only be sold if the bids meet or exceed this amount. If the highest bid is £290,000, the property will not be sold.

Summary

• Guide Price: Is not the figure that the auctioneer expects the property to sell for, but merely an indication as to where the reserve is currently set.  The Guide and reserve can and do change throughout the marketing period. Do not rely on it as a valuation.
• Reserve Price: The minimum price the seller will accept, confidential, and non-negotiable during the auction.

Understanding these two terms helps buyers prepare for auctions, knowing the approximate value (guide price) and the minimum threshold for a successful purchase (reserve price).

Work out what a property is likely to sell for by running a search on our website we have many clever tools on our website including property price history and whether a property has been to auction before. If you’ve worked out what you think the property will sell for and the price is within your budget, then do the due diligence.