How Accurate Are Guide Prices at Property Auctions?

When browsing auction listings to find a property on which to bid, or when researching the amount for which to sell your own property, you should see the “guide price” displayed alongside each lot.

Of course, in-person and online auctions involve a number of figures, all of which are calculated in different ways. But what is a property auction guide price, and how accurate are they?

In this article, the home buying and selling experts at Property Solvers explore this question and discuss the wider topic of guide prices at property auctions.

What Does “Guide Price” Mean?

So, what is a “guide price”?

Property auction guide prices provide an indication of what experts believe the lot is worth. The auctioneer or auction house decides upon the figure based on their own research.

Auction house brochures and websites display these amounts in order to attract potential buyers and to give them a good idea of the ballpark in which they should be bidding. This will help those buyers to budget and to pace themselves for the duration of the auction.

Of course, an auction property may sell for far more than its guide price. This depends on whether a lot proves popular enough to provoke a “bidding war”. Alternatively, the auctioneer may reduce the guide price in order to start the bidding at a lower sum due to little interest.

It’s worth noting that the guide price does not include payments or fees due to the auctioneers once the property is sold.

How Do Auctioneers Calculate a Guide Price at Property Auction?

Auctioneers usually calculate the guide prices on houses sold at auction in a similar manner to a typical house valuation. A specialist surveyor will inspect the property and take the following into consideration:

• Condition of the property
• Age of the property
• Size of property
• Property features, such as roofing type
• Location of the property
• Appeal of surrounding neighbourhood
• Proximity to amenities
• Number of bedrooms, bathrooms and reception rooms
• Standard of décor
• Size, appearance and condition of outdoor spaces
• Extra land / building space alongside any potential for planning and/or Permitted Development
• The state of the property market in general

The survey will also explore the sale prices of up to five similar properties in the surrounding area. Legal factors, such as ongoing access disputes, will also be taken into account.

What is the Difference Between Guide Price and Reserve Price at Auction?

As mentioned, the guide price gives an idea of the value of the property and influences the amount at which the auctioneer will start the bidding. The “reserve price”, however, is the lowest bid a seller will accept. This may be up to 10% higher than the guide price, or lower if the seller wishes to part with the house quickly.

A potential buyer may bid higher than the competition, but their offer won’t be accepted if it is below the reserve price. The seller dictates the reserve price to the auctioneer. This amount is subject to change right up until the day of the auction itself.

How Accurate are Guide Prices?

It’s true that property auction guide prices are calculated based on each lot’s “fair market value”. However, auctioneers often display marginally lower prices in order to attract bids.

So it’s a good idea for buyers to consult guide prices for what to offer as a bid. Don’t stick to them religiously, though. It’s highly that you’ll end up paying a little more than the amount listed (especially in a hot market or if the property is in demand).

If you’re a potential buyer, you should always arrange a viewing of any property in which you are interested. You should also do your own research into the sale prices of similar local houses. You may also want to arrange an independent survey to make sure you are thinking along the right lines when it comes to a bid.

It is worth noting that, much like the reserve price, a property’s guide price may be changed right up until the auction.

In Conclusion

The more experience you have at auctions, the easier it will be to be able to navigate matters like guide prices. As a seller, it is always worth having a frank and transparent discussion about setting the guide price. After all, you may prefer to price the property low in order to achieve a fast sale. It’s important that you inform the auctioneer of that preference.

Both buyers and sellers should consider hiring an independent surveyor to check the property’s value. If this second opinions differs greatly from the original amount quoted, you’ll probably need to adjust your plans moving forward.

When selling a property via Property Solvers, you don’t need to worry about guide prices or reserve prices. Our team of experts will provide you with a cash offer up front – worth up to 75% of your property’s fair market value. If you’re happy with this offer, we can close the sale in as few as seven days. This will enable you to achieve a speedy sale with no fuss and no estate agency or solicitor fees.