There are many terms and phrases that are used in auctions, and people may be unaware of what they mean. One important term is Suggested Opening Bid. It is very important to understand what this means, as it is relevant in every auction you attend.
Suggested opening bid is the amount established by the seller for each property as the point at which the bidding should start. Too high and the property will receive less (and possibly no) interest from bidders. If the seller is unsure of where to start, consultation with with our auction specialist Realtors is sure to help.
In an ascending open auction, the rule of thumb is that there should be at least a 50 percent increase in the bids from start to finish. In order to achieve this, the auctioneer must start the auction by announcing an opening or suggested bid that is low enough to be accepted by at least one one of the bidders. Once there is an opening bid, that always triggers the rest of the bidders who will typically submit higher bids. The auctioneers who are experienced and knowledgeable will often select asuggested opening bid that is about 45 percent lower than the lowest estimate. This then enables a certain level of safety to guarantee that there will be a lively auction with many bids submitted.
Several studies indicated that the lower the suggested opening bid is, the higher the final winning bid price ends up being. The lower the starting bid the more people seem to be interested and as a result the property ends up selling high. Without any low bids there will not be any high bids.
Another approach to choosing a suggested opening bid is for the auctioneer to ask what the expected final sales price is for the property, which will directly reflect the buyer’s perception of the value of the property. Either way you look at it, auctions seem to be the best way for buyers and sellers to come together and sell property. It is typically a win-win situation no matter what way you look at it.