Buyers want to win the home they love without paying more than they can afford. Sellers hope to reach a price they are happy with on auction day. What decides if a home sells at auction or moves to private talks?

How a Reserve Price Auction Works for Buyers and Sellers

The answer is the reserve price, the lowest amount the seller will accept. Read on to learn how auction bidding works, how buyers and sellers can get ready, and what Victoria’s new reserve price rule means.

Key Takeaways

• A reserve price is the lowest amount a seller will accept at auction.
• Victorian buyers now see the seller’s reserve at least seven days before auction.
• Once bids reach the reserve, the auctioneer announces the home is “on the market”.
• The winning bidder signs a binding contract and pays a deposit on auction day.
• Buyers and sellers prepare early because auction sales have no cooling-off period.
• If bids fall short of the reserve, the property is “passed in” unsold.
• The seller can then negotiate privately, first with the highest bidder.

What Is a Reserve Price?

A reserve price is the minimum amount a seller sets for an auction. Bids must reach the figure before the home can sell. The vendor can say no to any offer below the reserve.

Who Sets and Sees the Reserve

The seller sets the reserve after talking with their agent. Recent local sales and open home feedback help the owner pick a realistic figure.

Victoria changed the rules in October 2026. Agents must now publish the seller’s reserve at least seven days before the auction. The law requires one dollar amount, with no ranges or extras like “from” or “+”.

If the seller changes the figure, the seven-day count starts again. An auction cannot go ahead without a reserve published in time.

In other states, the reserve stays private between the seller, agent and auctioneer. Buyers there can compare recent sales of similar homes nearby to judge a likely price.

How Bidding Works on the Day

Before bidding starts, the auctioneer explains how the auction will run. In Victoria, the written rules must be on display for at least 30 minutes beforehand.

Some states, such as New South Wales and Queensland, require bidders to register with photo ID. In Victoria, the auctioneer must reveal who is bidding if someone asks.

The auctioneer calls for an opening bid. Each new offer must top the last one. The auctioneer can refuse a bid or set the minimum rise.

Once offers reach the reserve, the auctioneer announces the home is “on the market”. From then on, the property will sell to the top bidder. The auction continues until nobody offers more. No bid counts after the hammer falls.

The Winning Bid Is Final

The winning bidder signs the contract of sale straight after the auction. A deposit, commonly 10% of the price, is also paid on the day. From the moment the parties sign, the sale is binding.

In Victoria, every bidder accepts the contract terms on display before the auction. Nothing in the contract can change once bidding begins. Buyers who need a longer settlement should ask the agent before auction day.

Prepare Before Auction Day

A cooling-off period lets a buyer cancel a contract shortly after signing. Auction purchases have no such right.

Buyers should arrange finance approval and building inspections before they bid. A firm price limit, based on the published reserve and recent sales, protects their budget. A property lawyer can also check the contract ahead of time. Buyers need photo ID and the deposit funds on the day.

Sellers need the contract and disclosure papers ready before the campaign starts. In Victoria, the key document is the Section 32 statement.

When Bids Miss the Reserve

The auctioneer declares the property “passed in” when the top bid is lower than the reserve. No sale takes place on the day.

The owner keeps the home and can still agree to a private deal. If no sale follows, the seller generally pays marketing costs and the auctioneer’s fee.

Private Talks After the Auction

After a pass-in, the agent normally speaks with the highest bidder first. Offers then pass between buyer and seller until they agree on a price. Other interested buyers can have their turn afterwards.

Each state sets its own cooling-off rules for sales after an auction. In Victoria, the right does not apply to sales within three clear business days before or after an advertised auction. Queensland has a similar rule for registered bidders who buy within two business days of a pass-in.

Get your contract checked before you bid or sell at auction.

Get Advice Before Auction Day

Clear knowledge of the reserve price helps you bid or sell with confidence. Reach out to meet property lawyer Melissa Barlas about any questions, decisions, or past experiences with your home sale or purchase. Clear advice before auction day makes the whole process simpler.

Frequently Asked Questions

What is underquoting in real estate?

Underquoting is when an agent advertises a home below the seller’s reserve or asking price. Victorian law bans the practice. The quoted figure also cannot be lower than a written offer the seller rejected or the agent’s own estimate. A final result above the advertised price does not prove underquoting on its own. Strong competition on the day can push bids higher.

What replaced the Statement of Information in Victoria?

Since 1 October 2026, Victorian agents use a Property Price Statement instead. The form shows an indicative selling price, key features of the home and the suburb median. It also lists three comparable sales and, for auctions, the seller’s reserve. Agents must include it with online property listings.

What is a vendor bid at a property auction?

A vendor bid is an offer the auctioneer makes for the seller. In Victoria, the rules on display must say if vendor bids are allowed. The auctioneer also announces each vendor bid clearly.

Is dummy bidding allowed at a real estate auction?

No. Dummy bidding is a fake offer from someone with no plan to buy the home. The practice is illegal in Australia, with heavy penalties for anyone involved. The ban protects buyers from paying more because of false competition.

Are auction results and sale prices made public?

In Victoria, agents must publish the final price within seven days of the contract going unconditional. The figure stays online free of charge for at least 18 months. Home buyers, sellers and property investors can use the data to study local prices.