Determining reserve prices can be tricky when it comes to selling a property at auction, which means you need an auction strategy to maximise your chances of selling.

You need to balance getting a high price to ensure you gain a decent profit while maintaining a fair price to get the bidding going, which can be a difficult balancing act.

This makes getting your pricing right, and how the market behaves in response, important. First and foremost, you need to be realistic when setting a reserve price and have a finger on the pulse when it comes to current market conditions.

This is where an experienced local estate agent can help, as they will have a very good idea of prevailing property prices and the latest sale prices in your suburb.

Let's start by defining what a reserve price is.

What is a reserve price (meaning)?

A reserve price is the minimum amount, or bid at auction, you would be happy to accept for your property.

You usually set it with your agent. Outside Victoria, you then usually give it to the auctioneer in writing before bidding starts. In New South Wales and Queensland, it must be in writing by law.

Buyers usually aren't told your reserve outside Victoria, and in Queensland the agent and auctioneer aren't allowed to reveal it. In Victoria, if an agent is running the auction of your home and the auction is on or after 16 October 2026, they must publish your reserve as a single dollar figure at least 7 days before it.

Victorian agents must also ask you for your reserve in writing, including the figure they propose and why. You can then sign to accept their figure, sign to set your own, or ask for another proposal. If you change it once it's published, the 7 days start again.

For what an auction costs, and how Victoria's reserve rule affects its timing, see our guide to auctioneer costs.

When bidding reaches your reserve, or a lower price you agree to accept, the auctioneer usually announces that the property is 'on the market'. From then on, the property goes to the highest bidder. But if bidding stops short of your reserve, you don't have to sell.

When that happens, and you won't sell at the last bid, the property is 'passed in'. You can then negotiate with bidders, usually starting with the highest. In Victoria and the ACT, if the property is passed in below the reserve, the law gives the highest bidder the first chance to negotiate.

Without a reserve, your property sells to the highest bid, however low. In Victoria, if an agent is running the auction of your home, the auction must have a reserve. In Queensland, the auctioneer needs either your reserve in writing or your written confirmation that you understand what selling without one means.

Now let's look at what you need to take into account when setting your reserve price for an auction.

How to set a reserve price: auction reserve price strategy

Start with what's happening in your local market, then decide on your number. These steps can help:

1. Ask your agent for their estimate of the selling price and the recent comparable sales behind it.
2. In Queensland, expect a comparative market analysis. An agent who gives you a likely price, or an auctioneer helping you set the reserve, must give you one, comparing your home with at least 3 similar homes sold within 5km in the last 6 months. If one can't be prepared for your home, they must explain in writing how they worked out its market value.
3. Check recent sale prices for similar homes in your area yourself.
4. Watch how the campaign is going: how many people inspect, ask for the contract or make an offer.
5. Consider paying an independent valuer. Your agent's estimate isn't a valuation, and a valuer's report is a different thing.
6. Choose the lowest price you'd genuinely accept. Outside Victoria, give it in writing before bidding starts. In Victoria, if an agent is running your auction, it has to be settled earlier, because they must publish it at least 7 days before the auction.
7. In South Australia, your sales agency agreement (the contract you sign with your agent) records the selling price you told your agent you'd accept. Your reserve can't be set above 110 per cent of that price, and for an auction the agreement can't be changed to raise the price.
8. Decide in advance whether you'd accept less on the day, and how much less. In Victoria and New South Wales, you can still accept a lower bid at the auction.

Now let's look at your pricing strategy and the implications of setting a high or low reserve price.

Setting a reserve price that is too high

As a seller, you want the best price for your property, but setting a reserve price that is too high can have its own ramifications, bearing in mind that the reserve price is the lowest price you are willing to sell your property for.

Set it too high, and the property is more likely to be passed in. Your agent may then suggest negotiating with bidders or offering it for private sale. Our guide to selling your property covers each step of the sale.

It is all too easy to get carried away in a 'hot' market and let your expectations become too unrealistic, but you could be setting yourself up for failure.

When setting your reserve price, it's advisable to take into account your property's current market value and try to find a reserve price that is reasonable. Using a property valuation report as a guide to setting your reserve price can be a good way to ensure your reserve price is not overly ambitious.

You don't want to undersell your home either.

Setting a reserve price that is too low

Many sellers worry about undervaluing their property and selling it for below market value.

A low reserve makes a sale on the day more likely, but it can't guarantee one, because bidding may not reach it. A low reserve can also work in sellers' favour, as it can drive up competition for your property.

In a scenario where buyers have reached the reserve price, this means the property is truly 'up for grabs' and can result in fiercer and more competitive bidding.

Ensuring you make a decision that is fair to both the high and low spectrum of pricing your property can be a significant influence in the overall selling price of your property.

For ways to get bidding past your reserve, see our guide to selling for more than your reserve price.

Can buyers find out your reserve price?

In Victoria, yes, if an agent is running the auction of your home, they must publish it at least 7 days before the auction. In Queensland, the agent and auctioneer can't reveal it. Elsewhere, buyers can ask, but agents usually don't say.

On the day, bids can start below the reserve. If the auction's conditions allow vendor bids (bids made on your behalf, usually by the auctioneer), they're generally announced. A vendor bid usually tells bidders the reserve hasn't been reached yet.

Understanding underquoting

Underquoting is when an agent advertises or quotes a price below what they expect your home to sell for. Victoria, New South Wales and South Australia all have laws against it. In Queensland, agents can't give any price guide for an auction.

In Victoria, your reserve also limits how your home is advertised. An agent can't advertise or quote a price below your reserve once you've given it. Nor can they go below their own estimate of the selling price, or below a written offer you've rejected as too low.

A Victorian agent's estimate must also be reasonable. It has to be based on the sale prices of the 3 most comparable homes sold nearby in the last 6 months (18 months outside Melbourne), or fewer if there aren't 3.

If you're unsure about their figure, ask your agent which sales their estimate is based on, and how your home compares.