Auctions 101: Guide Price vs. Reserve Price

At auctions, two key terms often cause confusion—the guide price and the reserve price. Both of these terms are pivotal to understanding how auctions operate, yet their distinction is not always clear.
Today, we will help you better understand these terms, so you know what to expect at any auction. Explore our quick explanation of auction guide price vs. reserve price so you can fully prepare for your next bidding experience.
Defining Reserve Price
The most straightforward of the two terms is the reserve price, which is essentially the seller’s safety net. It represents the lowest price the seller is willing to take for their property at the auction. The auctioneer is not obliged to sell the property if bidding doesn’t reach the reserve price.
The reserve price ensures that a property will not sell for less than they are willing to accept from the seller’s perspective. A listing may feature the reserve price for bidders, but that won’t always be the case, and the seller is not required to disclose that information to bidders before the auction. That said, you will be aware if you are at an auction with a reserve price, so you can set your expectations and bidding strategy accordingly.
Understanding Guide Price
The guide price is primarily an indicator, a rough estimate of what an auctioneer believes the property might sell for based on market conditions and the property’s attributes. It’s like an invitation to potential bidders, tempting them with a price range that the property might realistically reach.
However, please note that the final selling price can exceed this guide price depending on the bidding’s competitiveness. As you can see, understanding the difference between guide price and reserve price at auctions is critical because both have very specific bidding processes.
Setting Proper Expectations
Now that you know how to define reserve price and guide price look for the bidding style at each auction you attend. This information provides a clearer picture of the auction process and helps in strategic bidding.
Remember, knowledge, focus, and confidence are essential in an auction. Being confident requires knowing exactly what you’re bidding on and what the result may be so it doesn’t catch you off guard.
At Midwest Land Management, we make it easy to find great farmland auctions with our land management group. Browse the properties available now so you can put this information into action for a smoother auction experience.