What Happens if the Highest Bid is Under the Auction Guarantee Sale Price (Reserve Price)
If the highest bid is under the Auction Guarantee Sale Price (reserve price), the buyer (known as the Auction Guarantor) purchases the property for the Auction Guarantee Sale Price. If you think about it, the buyer was happy to pay this price before the auction.
The Seller would receive the Auction Guarantee Sale Price for their property, which they also were happy to receive for their property before the auction.
The following is an example of what happens if the highest bid is under the Auction Guarantee Sale Price.
The Seller & Auction Guarantor agreed prior to the auction to the following.
- Auction Guarantee Sale Price - $500,000
- Agreed Profit Share - Auction Guarantee Seller – 50% & Auction Guarantor – 50%
On auction day the highest bid was $490,000 and was made by a Third Party.
In this scenario as the highest bid price is below the Auction Guarantee Sale Price the property is “passed in”.
Also as the highest bid is below the Auction Guarantee Sale Price there's no profit to share and the Auction Guarantor is legally obligated to buy the property for $500,000.
The Seller’s Profit Share = $0
The Auction Guarantor's Profit Share = $0
So in summary, the Seller sold their property for $500,000 and the Auction Guarantor purchased the property for $500,000, and if you think about it, they were both happy with this sale and purchase price prior to the auction.
To learn how you can get the most out of our patented Auction Guarantee System be sure to watch our other explanation videos.
If you are a seller, a buyer, an agent, a broker or an auctioneer and would like to use the patented Auction Guarantee System please email info@auctionguarantee.com.au.
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