Estimates, Reserves and Pricing

Guide prices, starting prices and the strategies behind them - all you need to know about estimates and reserves.

What is an auction estimate?

An auction estimate is for potential buyers and indicates the price range in which the auction lot is expected to sell. The range is made up of a low estimate and a high estimate based on standard bidding increments.

The high estimate is usually 50% higher than the low estimate. For example: £1,000 to 1,500 or £20,000 to 30,000.

What is a reserve?

The reserve is the minimum price a seller is willing to accept for an auction lot. In a timed auction (also known as an online auction), this is also the starting price for the lot. 

So if a seller's reserve, their minimum price, is £1,000 then the bidding will start at £1,000. 

How are auction estimates decided?

It is up to each seller to decide the estimates and reserves for their lots but as a guide, estimates are based on three things:

• Previous selling prices for the auction lot
• Prices achieved for similar auction lots
• The known fixed value of the item 
  
  

For an item with a known value, an estimate is usually sits 20% above and 20% below its value. 

For example: An item worth £1,000 will have an estimate of £800 to 1,200.

Unique characteristics of each item also influence an auction lot's guide price. Among other things, these include its size, condition, subject matter, medium and any notable history of the object, also known as it's provenance. 

For instance, why did a fairly standard dress from the 1960s sell for $4.8 million at auction? Because it was Marilyn Monroe’s.

Do auction lots always need an estimates? 

No - often lots in fundraising auctions (charity auctions or benefit auctions) only have a starting price.

How are auction reserves decided?

As the reserve (the starting price) is the minimum a seller is willing to sell their auction lot, it is entirely up to them to decide. 

However, attractive starting prices can bring numerous benefits to an auction and can help achieve much higher results. 

What are the advantages of a low starting price? 

To take full advantage of the auction model, it is essential to have multiple bidders competing on each lot to send the final price well above the reserve. 

An attractive starting price entices multiple bidders, triggering three distinct psychological effects: 

1. The attachment effect - Regardless of how low, placing a bid on an item fosters a sense of ownership and connection between the bidder and the lot. Once engaged in the auction, they are more included to bid to win, believing the lot should be theirs.
   
   
2. Competition - Studies indicate that people tend to bid higher as soon as there is competition in an auction. The presence of competing bids motivates bidders not only to own the item but also to outbid others and be the winner.

3. Endorsement - A friendlier version of competition, seeing numerous bids on an item validates a potential bidders decision to join the bidding. It instils confidence their taste and desire for the item. 

Is the reserve public knowledge?

In a live auction the reserve is not shared publicly and is kept confidentially between the seller and the auctioneer.

In a Timed Auction (also known as a Silent Auction or Online Auction) the reserve is indicated online by the 'starting price'.

Do auction lots always have a reserve? 

No - these are known as 'no reserve auctions' where items can be bought for as little as the first bidding increment. At Indy.auction, this is £10. 

No reserve auctions significantly increase the likelihood of all items selling and so are often used for stock clearance sale auctions. 

What are the bidding increments? 

Bidding increments generally move up in bids of roughly 10%, for example: £10,000, £11,000, £12,000, £13,000. You can learn all about the industry standard bidding increments in our article here.

Where can I get more advice? 

For a free one to one consultation with our Auction Advisory team, contact enquiries@indy.auction.

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