5th July 2024

How to explain auction prices to sellers

At SDL Property Auctions, we regularly partner with estate agents to help them provide alternative selling routes for clients looking for quick and secure ways to sell their property. While our services include the ability to list properties in our auctions, we also provide additional support to partners to help them explain the benefits and dispel the rumours surrounding auctions to ensure sellers can get the most from their auction sale.

If you’re an auction partner supporting your sellers down the auction route, one of the common misconceptions you may need to be aware of is the belief that properties sold by auction sell for less than the market value – however, this simply isn’t true. It’s important to quell these misconceptions and to help your seller understand the prices and guidelines that come with selling by auction to protect their peace of mind.

In this blog, we’ve broken down the most important pricing guides that your seller will need to understand while going through the auction process. Recognising the terms, and knowing what decisions need to be made between yourself and your seller, will help protect them from selling their property for less than they are happy with.

What is an auction guide price?

As the name suggests, a guide price acts as a guide for the buyer, indicating where the bidding for the property will likely begin on the day of the auction

This figure is visible to buyers from the moment it’s set on the website, which means having an attractive guide price is very important in helping to generate interest for their property. A good guide price may even result in a bidding war and drive up the sold price of their property, so it’s important to consider setting something that will stand out amongst other properties in that area.

However, there is no guarantee that a property will sell for the guide price, it might sell for a bit more or a bit less, and this will depend on the interest levels. This is why it’s so important for the seller to seriously consider an attractive price, as having a guide price that is too high for that area or not intriguing enough may lead to the property not selling. The guide price ultimately sets the foundation for competitive bidding to push the sale price up and is predominantly used for marketing purposes

If your seller finds themselves worried about their property not reaching the guide price or selling for a price that they’re not happy with – don’t worry, as this is where the reserve price comes in.

What is an auction reserve price?

This figure represents the minimum price a seller is willing to accept for their property. Regardless of where the bidding level reaches on the day of the auction, the property will not be sold for a penny less than what the seller has set for the reserve price. If a bid comes in below the reserve price, the property will not sell – ensuring security and peace of mind for the seller that their property won’t sell for a price they’re not happy with.

In the interest of fairness to both the seller and the buyer, the reserve price is kept confidential between the seller and auctioneer, but it cannot be set to anything that exceeds 10% above or below the published guide price.

A lot of sellers may be unaware that they can set a reserve price, so it’s important to discuss this with them as it will give them peace of mind when it comes to selling at auction. A reserve price gives the seller complete control over the sale of their property, and the seller can also change this reserve price at any time.

What is an auction sale price?

The last of the prices that the seller will need to understand before the auction is the sale price. Just as it sounds, this is the price of the highest bid that the property has achieved during the auction and what it will sell for (unless it is under the reserve price).

What’s the lowest your seller will accept?

Once you have the seller considering auctions as a way to sell their property, we recommend asking the seller about what the absolute lowest price they would be happy to accept on their property is. It’s important to communicate with them that the lower they are happy to set the reserve price, the lower you can set the guide price, and a low guide price will be very attractive to buyers and maximise the chances of it selling. Having a guide price that is too high may lead to a lack of interest, so ensure the seller is aware of this so you can come up with a good price that balances the need to market their property attractively, while still leaving the seller feeling satisfied if the lot sells at the reserve price.

Get advice from the experts at SDL Property Auctions

When approaching the topic of selling at auctions with potential sellers, whatever their motivations are, it’s best practice to give them a run-through of these pricing terms. You’ll find that the more the seller understands the pricing terms and the guidelines set in place to protect them from an unhappy outcome, the more interest the seller will have in using the auction route.

If you have any questions about understanding the pricing guidelines that come with selling at auctions then you can contact us directly to speak with some of our auction experts for more advice.