The reserve price is set at your reserve meeting prior to the Auction. The figure is confidential between you, the agent and the auctioneer. A good reserve should be an acceptable walk-away price for you and appear achievable based on market feedback.
As the vendor, you must consider your position carefully because just as easily, the bidding could finish there and then and you’ll have to sell at that price. If you decide not to lower your reserve, the agent will usually ask the highest bidder if they want to raise their bid. If the property meets the owners reserve, the highest bidder will be the purchaser at the fall of the hammer.
Your final option is to pass the property in. The highest bidder usually has the right to negotiate with you first, and will often buy the property straight after the auction. If the auction has been properly conducted and the property was priced correctly, there is usually not a huge gap between the highest bid and the reserve.
Auctions can be stressful and emotionally-charged events for both buyers and sellers. Important decisions such as the reserve price for the seller, and the highest price you’re willing or able to bid as a buyer, should always be made before the day of the auction. This way you’ll make a decision based on logic.