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How auctions get lower prices
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2. RESERVE PRICE
The reserve price is the price at which the home can be sold. It's the lowest price a seller is prepared to accept. And that becomes the central focus of the auction.
If you are trying to get the highest price, do NOT make your lowest price the main focus of the sale.
There are two parties in a sale price negotiation - a seller and a buyer. Each has their "final price" or their "limit". The sellers' final price is the reserve - that's the lowest the home will sell for. The buyers' final price may never be known.
There is no procedure at an auction for determining the highest price a buyer will pay. Only the highest price of the losing buyers may be known because they stop bidding once they reach their limit. But the buyer who is the highest bidder often buys at less than his or her limit.
Most buyers at auction buy for less than their limit which means most sellers at auction under-sell their homes.
You can't possibly get the highest price for your home if the central focus is on the Sellers' Lowest Price. You can only get the highest price if the focus is on the Buyers' Highest Price.
As a seller, you are at a huge disadvantage because your lowest price, the 'reserve', is always disclosed BEFORE the home is sold. That’s when you hear the agent yell, “It’s ON the market”. Everyone knows your lowest price.
Not so with the buyers. IF their final price is ever disclosed, it will be AFTER the sale is over. By then it is too late for the sellers.
This is how auctions get lower prices.
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