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How to Set a Reserve Price in an Auction

By: Chris Nickson - Updated: 25 Apr 2012 | comments*Discuss
 
Auction Reserve Value Bid Highest Bidder

In auction terms, a reserve is the price a seller sets on an item. If bidding doesn’t reach the point, the seller isn’t obliged to sell the item. It’s a way of ensuring items of value aren’t sold too cheaply and if you’re a seller, it’s a powerful weapon in your arsenal. The winning bidder not only has to meet the reserve price, he also has to have the highest bid.

When to Use the Reserve

If you’re selling an item at auction, you’ll use the reserve if you’re submitting an item that has value that you want to realise, but you’re not sure how people will bid on it. It could be a painting by an artist not known to many, a piece of jewellery, an antique, anything which might end up selling for a large amount (a reserve is also an excellent way to combat organised low bidding). You can use a reserve in both in-person and online auctions.

You will pay the auction house for using the reserve, but it’s a lot better than having something of worth falling under the hammer for far less than you’d anticipated (which has happened before and certainly will again).

If your item is entered in an auction where bidders will know its worth, you might not need the reserve, although it might still be worthwhile to invoke it. You often find it at art auctions at Sotheby’s and Christie’s for instance, involving work by famous artists which are liable to go for high sums.

Obviously, you wouldn’t use a reserve for commonplace items – there has to be some value to the thing.

Tips for Using the Reserve

Do your research before offering the item at auction. Learn how much similar things have sold for before. Set your reserve accordingly. It shouldn’t be too high or you may end up taking the item home and out of pocket for the listing and reserve fees. Conversely, don’t set it too low or you might not reach the amount you’d hoped. If anything, you’re better erring on the slightly low side and hoping bidding pushes the price higher.

Be sparing. Unless you’re dealing exclusively in high-ticket items, you won’t often need to bring in the reserve.

The more you know about your item, the more effective your reserve will be. If you can supply provenance for a picture or antique, as well as a detailed description, the more likely people will be to bid.

You do have the option to sell to the highest bidder if the reserve isn’t met. In some circumstances (say, if the bid is very close to the reserve) you might want to do so; otherwise, though, it becomes pointless to even have a reserve.

If the Reserve Doesn’t Work

There are frequent instances where goods don’t reach their reserve price. If it happens to you, examine the reasons. Did you set the reserve too high? How far did the bidding go? Or was the auction perhaps inappropriate for what you were trying to sell?

Don’t be discouraged. Enter the item in a different auction, perhaps something more specialised or possibly with a slightly lower reserve. If it fails to sell again, you might have to rethink your strategy – it might not be worth what you believe it to be.

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