How Accurate are Guide Prices at Property Auctions?

Properties selling through auctions are listed with a guide price that is determined after taking a number of different factors into account. It is the first thing that potential buyers check when looking for the right property to buy at auction. But are properties sold according to these guide prices? How accurate are guide prices at property auctions? Read the article below to find out.

Auction hammer

The Guide price, Reserve Price, and Sold Price – What’s the Difference?

A guide price is the price of a property that is determined when it enters the auction. It is not fixed, and can change according to the interest of potential buyers and changes in market rates. Guide prices at property auctions give buyers a general idea of what they would be paying if they buy a certain property at auction.

A reserve price is the minimum amount that a seller is ready to accept from a buyer at auction. Auctioneers cannot sell the property for less than the reserve price. If it is not met during an auction, the seller can withdraw their property, and he is not required to sell it even to the highest bidder. Sellers cannot reveal reserve prices to potential buyers.

As the name indicates, a sold price is the actual price that the buyer pays to purchase a property. It can be greater than both the reserve and guide prices.

How are Guide Prices at Auction Set?

Guide prices at property auctions are set with many different factors in mind. The guide price may vary from time to time, according to any changes in those factors. Sometimes, it can be lower than the actual worth of the property, if the seller wants to sell their property quickly.

Some of the things that auctions and sellers consider when setting the guide price of a property are:

  • How old is the property?
  • Is it structurally sound?
  • When was it renovated last?
  • How many bedrooms, bathrooms, does it have?
  • Extra selling features such as gardens, garage and kerb appeal etc..

The valuer will also consider prices of 3 to 5 properties of the same size that were sold around 6 months ago in the same neighbourhood.

In most cases, auctions set low initial prices to entice potential buyers and increase interest in the property. This creates competition among buyers, and bidding prices gradually go up during bidding.

How Accurate are Guide Prices?

Guide prices at property auctions are not 100% accurate. They usually provide buyers with a range of the expected price within which the sale price will fall. They are initially kept low to attract buyers.

How accurate the guide price of a property is also depends on the auction house. Some auction houses set very low prices, and then increase them greatly, while others make sure their prices are around 10% more or less than the sale price.

As a buyer, you should evaluate a property to determine its market value. This will give you an idea of how accurate the written guide price is. You can take experts like real estate agents along with you when inspecting the property that you would like to bid for. They will look at all the essential features, and give you an idea as to the property’s worth in the current market.