Auction Reserve Calculator NZ

Updated  The reserve is confidential between vendor and agent. Commission rates are negotiable with no set maximum.
Quick answer To walk away with $200,000.00 after repaying a $600,000.00 mortgage and paying the costs of selling, the reserve has to be $837,640.74. That is 98.55% of the $850,000.00 appraisal, so it is achievable. The floor, where the sale only just clears the mortgage and costs, is $632,932.45.

Reserves get set the wrong way round. The usual method is to take the appraisal, subtract a bit because that feels prudent, and call the result a reserve. What that produces is a number nobody can defend at five o'clock on auction day, when the bidding has stopped somewhere below it and everyone in the room is looking at the vendor. A reserve is only useful if it represents a real decision, and the way to make it one is to work backwards from the money you actually need. The deposit for the next house, the debts that have to be cleared, the amount that makes the move possible: those are facts about your life, and they translate into a price. Comparing that price against the appraisal then answers the genuinely important question, which is whether the sale you are planning exists at current market values.

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What you need
What selling costs
The reserve you need is below the appraisal, so the plan is achievable.
Reserve to hit your target
$837,640.74
98.55% of the appraisal
Floor reserve
$632,932.45
clears the mortgage and costs, nothing left
If it sold at the appraisal
$212,075.00
$12,075.00 more than you need

Selling at your reserve

Sale price at the reserve$837,640.74
Commission including GST$31,340.74
Marketing$4,500.00
Legal fees$1,800.00
Mortgage repaid$600,000.00
You walk away with$200,000.00

Three prices worth knowing before auction day

PriceSale priceCosts of sellingYou walk away with
The floor, breaking even on debt and costs$632,932.45$32,932.45$0.00
Your reserve$837,640.74$37,640.74$200,000.00
The appraisal$850,000.00$37,925.00$212,075.00

Between the floor and your reserve sits $204,708.29 of price. Bidding that stops in that range sells the house and clears your debts but does not fund your plan, which is the decision you will be asked to make on the day.

If it passes in

Marketing already spent$4,500.00
Recoverable if you do not sellNone of it
Cost of a reserve the market will not reach$4,500.00

Passing in is not a disaster, and the highest bidder usually gets first chance to negotiate. But the campaign money is gone either way, which is the argument for setting a reserve you have tested against the market rather than one that expresses how you feel about the house.

This sets a reserve from your own numbers and cannot tell you what the market will pay. The appraisal is an agent's opinion, not a valuation, and is not evidence that the property will reach it. Commission rates are negotiable in New Zealand with no set or maximum rate, so use the structure in your own agency agreement. This page ignores tax, which can apply to a sale under the bright-line test and other rules, and it ignores any mortgage break fee for ending a fixed rate early, which can be substantial and should be quoted by your lender before you set the reserve. Auction conduct, including vendor bids, is regulated and your agent must follow the auction rules that apply.

Work backwards from the money, not forwards from the price

The reserve is the only number in a selling campaign that has to survive contact with a real decision under pressure. Everything else can be revised quietly; the reserve gets tested at a specific moment in front of an audience. A figure derived from the appraisal has no defence at that moment, because the appraisal was always an opinion and opinions look thin when actual bidding has stopped below them. A figure derived from what you need is different. It answers the question the auctioneer is really asking, which is not whether the price is good but whether you can accept it.

The gap between the floor and the reserve is where the decision lives

Two prices matter and most vendors only calculate one. The floor is the price at which the sale clears the mortgage and the costs and leaves nothing, and below it selling actively costs you money. The reserve is the price that funds whatever you are selling for. In between is a wide band where the sale is possible but your plan is not, and that band is where auctions actually finish more often than anyone expects. Knowing both numbers before the day converts a moment of pressure into a decision you have already made.

A reserve above the market spends the campaign budget for nothing

The marketing on an auction campaign is spent up front and does not come back if the property passes in. That makes an unachievable reserve expensive in a way a high asking price is not. If the reserve you need sits above the appraisal, the campaign cannot deliver it, and running it anyway means paying several thousand dollars to discover something the arithmetic already said. The useful response is not to lower the reserve to whatever will sell, but to look again at the target: it may be that the next purchase needs to be smaller, or that this is not the year to move.

Worked example

A vendor needs $200,000.00 to fund their next deposit, and has $600,000.00 left on the mortgage. Selling costs are a commission of 4% on the first $500,000.00 and 2% above that, a $500.00 administration fee, GST on both, $4,500.00 of auction campaign marketing and $1,800.00 of legal fees.

The reserve that delivers exactly $200,000.00 is $837,640.74. At that price the commission including GST is $31,340.74, and after marketing, legal fees and repaying the mortgage the vendor is left with $200,000.00.

The appraisal is $850,000.00, so the reserve sits at 98.55% of it and the plan is achievable. Selling at the appraisal would leave $212,075.00. The floor, where the sale only just clears the mortgage and costs, is $632,932.45, so there is $204,708.29 of price between selling at all and selling well enough.

How this is calculated

Net proceeds at any price are that price less the tiered commission on it, less the administration fee, less GST on both, less marketing and legal fees, less the mortgage repaid. The reserve is the price at which those net proceeds equal your target. Because the commission depends on the price and the price depends on the commission, the calculator solves for it by narrowing a range until the two sides agree to within a cent, rather than adding a fixed percentage. The floor is the same calculation with a target of zero, which is the price at which the sale exactly clears the mortgage and the costs of selling. The appraisal is not used in either calculation and appears only as a comparison, because what the market will pay is not what you need.

Official sources

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Frequently asked questions

What is an auction reserve?

The reserve is the price the vendor sets as the minimum they will sell for on the day. Bidding below it does not sell the property. Once bidding reaches the reserve the property is on the market and will sell to the highest bidder. The reserve is confidential between the vendor and the agent, and it is normally set or confirmed shortly before the auction rather than at the start of the campaign.

What happens if the property does not reach the reserve?

It is passed in, meaning it does not sell under the hammer. The highest bidder usually gets the first opportunity to negotiate with the vendor, and if that does not produce a sale the property typically goes to the market by negotiation. The marketing has already been spent either way, which is the real cost of setting a reserve above what the market will pay.

Should I set the reserve at my appraisal?

The appraisal answers what the property might sell for, which is a different question from what you need it to sell for. Setting the reserve from the appraisal risks either leaving money on the table or, more commonly, setting a level you cannot actually afford to accept. Working backwards from the amount you need to walk away with produces a figure you can defend, and comparing it against the appraisal then tells you whether the plan is realistic.

What if the reserve I need is above the appraisal?

That is important information and it is better learned before the campaign than after it. It means the sale cannot deliver what you need at current market values, and the options are to reduce what you need, to accept less, to sell by another method, or not to sell yet. Running an auction campaign with a reserve above the market spends the marketing budget on a result that was arithmetically unavailable.

Is a vendor bid the same as a real bid?

No. A vendor bid is a bid made on the vendor's behalf by the auctioneer, and it can only be made below the reserve and only if the auction has been advertised as allowing it. Its purpose is to move bidding along, not to buy the property. New Zealand auction rules require vendor bids to be clearly identified as such when they are made.