Reserve Price

Plain-English definition. The reserve price is the minimum price the vendor is willing to accept at auction. If bidding fails to reach it, the property is "passed in" and not sold under the hammer.

How it works in Australia. The reserve is typically set in private discussion between the vendor and the agent on auction day, often after a final assessment of the campaign feedback. Reserves are confidential — vendors are not required to disclose them. Once bidding is "on the market" (i.e. has reached or passed the reserve), the auctioneer will announce that the property will sell and the highest bid wins. If bidding stalls below reserve, the property is passed in and the highest bidder generally has the first right to negotiate privately. Underquoting laws restrict how far below the reserve an agent can advertise — typically reserves cannot exceed the top of the advertised range by more than 10%.

Concrete example. A property is advertised at $1.0m–$1.1m. The vendor's reserve is set at $1.08m on the morning of the auction. Bidding opens at $900k, climbs to $1.05m, and stalls. The auctioneer pauses, consults the vendor, and announces the property is "on the market" at $1.07m — the vendor has lowered the reserve. Bidding resumes; final hammer at $1.12m.

Common confusion. Buyers think the reserve must equal the upper end of the advertised range — it doesn't, but advertised price guidance must be honest under state underquoting laws. Also: "passed in to the highest bidder" doesn't mean you've bought the property; you have first right to negotiate, but the vendor can still walk away.