Selling Your House at an Auction: Know about the Reserve Price

Selling a house can be easy if the right buyer meets the right seller at the right place at the right moment. However, this does not happen every time. In most cases, homeowners who wish to sell their homes take several weeks, even months to find a seller even if the house has been advertised in different newspaper ads. This is too long especially if the homeowners want to sell their property right away to avoid foreclosure.



One way to find a buyer fast is by placing the property on an auction. But as simple as it may sound, there is one thing that needs to be done in order to get a good deal: you need to set a reserve price.



A reserve price is basically the lowest price you are willing to sell your home. It protects you from highly unfavorable sale or getting a selling price lower than the price of your house.



This is different from setting a minimum bid. While participants know that there is a reserve price, the exact amount is not revealed to the bidders. If the highest bid is lower than the reserve price, you are not compelled to sell your house.



Why set a reserve price?



Setting a minimum bid too low will attract bidders but you will end up with an unsatisfactory low sale price. Setting it too high discourages the interest of the bidders. In order to help you sell your house without compromising one over the other, a reserve price should be set.



How to set a reserve price?



To set a reserve price, perform a property appraisal. Do this through the help of chartered surveyors. Usually, homeowners commit a mistake by letting the estate agents give the appraisal. The estate agents' job is to market your house and not to give an intuitive estimate of what they think your house is worth. As a result, unrealistic figure comes up either too low to make a quick sale or too high to secure your instruction.



It is also possible to do a property appraisal yourself. This is a bit complex as certain methods should be applied when estimating the price of your home. Still you can get the value of your property by using the "income approach" and the "comparable sales method" The income approach calculates the profitability of the property; comparable sales method involves looking into actual data. Both involve serious valuation to know your reserve price.