What Does “Without Reserve” Mean for Real Estate Auctions?
Know your auction terminology
Auctions are a fantastic way to buy and sell property. Sellers are able to avoid the hassle of a traditional real estate sale and know exactly when their property will sell. Buyers have the opportunity to look at a wide variety of properties, avoid the negotiation process, and can find great investment properties that fit their budget. Regardless if you are buying or selling, it’s important that you know all the auction lingo so that you are fully informed and can reap the greatest benefits from your auction experience. We are going to dive in specifically to cover two terms – “with reserve” and “absolute” auctions – so that you can make informed decisions before heading into your next auction.
If you come across an auction that is labeled as “with reserve” it means that the seller has set a minimum price at which they are willing to sell their property. This minimum is not disclosed to bidders interested in buying the property, nor is it the same as the starting bid. The reserve price is likely around the price of what the seller is looking to receive for their property. If the highest bid at the end of the auction does not reach the seller’s reserve, they can choose not to sell the property.
The other type of real estate auction you are likely to find is a “without reserve” or “absolute” auction. Essentially this is the opposite of a “with reserve” auction. The seller has listed the property without a minimum price and will sell their property to the highest bidder no matter what once the auction closes.
As a seller, you will have to determine if you want to list your property as “with reserve” or “absolute” when setting up your auction. Both have advantages depending on your specific circumstances. If you want to make sure that you receive a fair value for your property you might want to sell “with reserve.” This will bring you more serious buyers who have stake in the game and will
be more invested in winning your property. Additionally, if your reserve price isn’t reached, you have the option of still selling it to the highest bidder or selling your property in another way.
On the other hand, if you have been trying to sell a piece of property for a long time you may want to consider an “absolute” auction. You may have to make some compromises about what you plan on getting for the property, but absolute auctions are extremely attractive to buyers and you know that your property will be sold at the end of the auction.
When heading into a real estate auction it’s important to understand how to win a property. “With reserve” auctions are great if you are seriously considering a property and are willing to put your money where your mouth is. Additionally, you will probably have fewer buyers competing with you for the real estate. “Without reserve” or “absolute” auctions tend to be buyer favorites, because you don’t have to play any guessing games. If you are the highest bidder when the auction ends you know you’ve won the property.
We hope this has cleared up the difference between “with reserve” and “without reserve” real estate auctions! You can always refer back to the infographic below for a quick reminder of the difference between the types of real estate auctions. If you have any further questions about other real estate auction terms or are looking to sell your property, feel free to contact us here. If you’re ready to start bidding on a property, click the button below to see what auctions we have coming up!