The reserve price is the price that the vendor and agent agree will be the minimum acceptable selling price at an auction.
You must ask vendors for a reserve price before you hold a residential property auction, unless the vendor tells you otherwise. If the vendor does this, give them written notice of the possible consequences of selling without a reserve price.
A penalty of $20 000 applies if you don´t do this.
The property officially becomes ´on the market´ when bidding reaches or exceeds the reserve price.
If bidding does not reach the reserve price, then the highest bidder usually has the right to negotiate to buy after the auction.
If the vendor does not set a reserve, the property is on the market from the first bid.
You should also advise vendors that you cannot accept a bid from them if they have not set a reserve, or the reserve is exceeded.
Comparative market analysis
If you help a vendor determine a reserve price, you must give the vendor a comparative market analysis.
A comparative market analysis compares the sale of at least three properties of similar standard or condition, within a five kilometre radius, sold in the previous six months.
Auctioneers must not disclose the reserve price to any bidder or tell them that the vendor has set a reserve price. However, if the vendor agrees, you can give a copy of the comparative market analysis to the bidders.
Last reviewed 21/11/2011