03/09/2026
Understanding the reserve price
Homebuyers often feel frustrated by the auction system, particularly when quoted prices clash with reserve prices.
Consider a property marketed online for $1.1M to $1.2M. You view it multiple times, pay for a building inspection, and attend the auction. Bidding hits $1.2M, but the reserve isn't met. It later sells above a $1.25M reserve, revealing you never stood a chance.
The Victorian Government is tackling this with new reserve rules set to pass this October. Vendors and agents will have to disclose the reserve price seven days before an auction or fixed-date sale. While the intent is noble, its real-world impact is questionable.
That final week is critical. Last-minute buyers emerge, others drop out, and real interest solidifies. This gives vendors the confidence to set realistic reserves on auction day. Mandating early disclosure may cause nervous vendors to set inflated reserves out of fear of being forced to sell lower than desired.
Alternatively, sellers might bypass auctions for private sales. This creates less transparency for buyers, leaving them in the dark about competing interest. Agents themselves are still uncertain how to navigate the change.
In a competitive market, with four cashed-up bidders, the reserve becomes irrelevant—it comes down to who has the deepest pockets and is willing to pay what it takes to get the keys. Overly high reserves will simply cause more failed auctions, scaring off price-sensitive buyers and leaving homes to pass in for post-auction negotiation.
While buyers gain price visibility, the published reserve might just be an inflated buffer, some buyers may pass on a property they think they cant afford only to see it sell for less than the published reserve. The government is rightly attempting to stop underquoting, but this policy fails to address the root issue. Without industry insight, forcing publication of what may be false reserves will ultimately reduce buyer transparency.
Launching in a quiet market, this rule will make hesitant vendors even more cautious, further dampening a weak market short on quality stock forcing buyers to compete for high quality listings.