Terms of trade
ANY terms are used in real estate and, as the spring selling season approaches, it’s timely to explain three of those used in auctions: passed in, passed in on a vendor’s bid, and reserve price.
About 30 per cent of properties auctioned on any given weekend this year have been passed in. This occurs when the highest bid at the auction does not meet the seller’s reserve price.
Some properties that are passed in are done so on a vendor’s bid. This means the last bid was made by the vendor or by an agent on the vendor’s behalf. This shows demand at the auction has fallen short of the vendor’s expectations.
This year the proportion of auctions passed in on vendors’ bids is 13 to 15 per cent.
At the heart of the auction process is the reserve price— the minimum price a vendor wants for their property.
The reserve is typically set by the vendor on the day of, or the day before, the auction.
There is no requirement for the vendor to set a particular price or have regard to what similar properties have sold for; it’s simply the price they would like to receive for their property.
It’s also worth noting that though it often is announced, there is no requirement for the auctioneer to announce during the auction that the reserve has been met.