Making Sense of eBay Auctions With a "Reserve Price"
What to Do With Reserve Listings, Whether You're a Buyer or a Seller
Reserve price auctions can be a confusing topic for eBay sellers and bidders alike. Though they don't make up the majority of auctions on eBay, reserve price auctions are common enough that you'll likely encounter them eventually.
Make the most of reserve prices (or decide to avoid them altogether) by learning exactly how they affect buying and selling on eBay.
Reserve Price Basics
When a seller lists an item for auction on eBay, they are given the option to supply eBay with an optional "reserve price" for the item. This price, which is kept a secret from bidders, is the minimum amount for which the seller is willing to sell. You can tell the item you're watching has a reserve price if the words "reserve not met" are shown beneath the current high bid for the auction.
If a seller supplies a reserve price and none of the bids reach that price before the auction is over, the seller is not required to sell the item to the auction's high bidder. The seller can take another stab at hitting the reserve price by relisting the item, but the original auction simply ends unsuccessfully.
What Reserves Mean for Bidders
The act of placing a bid on a reserve auction is no different from the act of placing a bid on any other eBay auction. Enter your maximum bid and let eBay's proxy bidding system do the rest, or snipe and wait for the auction to end. The results of a reserve price auction, however, can be confusing and frustrating for inexperienced bidders.
If the Reserve Isn't Met, You Don't Win Anything
The seller isn't obligated to sell the item to you if the reserve price isn't met. You may place a bid and end up as the highest bidder only to learn, after waiting days or weeks, that the reserve was not met and the seller won't sell to you.
You Have to Wait to Learn Whether Your Bid Meets the Reserve
Whether you're using eBay's proxy bidding system or a sniping system when you bid on a reserve auction, you can't tell whether you're obligated to buy until the auction is over. Even if your bid doesn't meet the reserve price at first, don't give up and bid on a competing item. Competing bidders could drive up the price, and if you have automatic bidding enabled, you could end up hitting the reserve and winning the auction. If this happens and you've also bid on another item, you'll be on the hook to buy both of them.
Reserve Auctions Often End With Few/Low Bids
Because of the uncertainty described above, many bidders are reluctant to place bids on reserve auctions. As a result, it's common for reserve auctions to show a current bid well below the going rate for the item in question and for the item to receive fewer bids than a matching non-reserve item. On one hand, that means bidders have less competition for the item, but the lower bids make it less likely that the reserve price will be met.
Reserve Prices Can Be Higher Than You'd Expect
Reserve prices are often set by sellers just "testing the waters," or those with unreasonable expectations. As a result, it's common to find that the reserve is not getting met, even as bids go higher and higher. Chances are, the reserve price on the auction is set at an unreasonably high level, and all bidders are effectively wasting their time.
Reserve Auctions Are Often Used by Less Experienced Sellers
Because they tend to generate fewer bids and are designed to protect a seller that isn't sure of the market value of their goods, reserve auctions are often used by new or inexperienced eBay sellers. Their inexperience makes it more likely that they'll be slower to communicate, offer customer service, or ship the items.
All these factors make reserve bids among the least desirable types of auctions, even though the current bid price could be lower than that of non-reserve auctions. For most buyers, the uncertainty of whether their high bid will be high enough to meet the reserve makes it too big of an inconvenience.
Still, bidders may find compelling reasons to enter a reserve auction. There could be a lack of competing non-reserve auctions for similar items, for example, or superior seller feedback that justifies the inconvenience and helps soothe some of the uncertainty.
What Reserves Mean for Sellers
The drawbacks for prospective bidders on reserve price auctions are precisely what make reserve price auctions less desirable for sellers, as well. The consequences of reserve use for sellers are not to be taken lightly. Because of the uncertainty and hassle involved in reserve bidding, reserve auctions draw fewer (and thus lower) bids than similar non-reserve items. The act of trying to "protect" your investment by setting a reserve price may reduce its sales value, even if the reserve is ultimately met.
It's common sense, but it bears repeating: the purpose of a reserve price is to cancel the sale of an item for which bids did, in fact, exist. This means fewer sales overall and lower average prices. Keep in mind, just because your item didn't sell, that doesn't mean eBay will let you off the hook for fees. Setting a reserve price incurs a special fee, and if the item doesn't sell, that fee is coming out of your pocket instead of the sale price.
Reserve auctions can surprise buyers, resulting in a higher non-paying rate. Bidders may place a bid, see that they didn't meet your reserve, and move onto someone else's auctions. Days later, when the listing ends and they've turned out to be the winning bidder in a reserve-met auction, they may inform you that they bought elsewhere and try to back out of the transaction. By not setting a reserve price, you'll avoid this non-paying bidder problem.
In many cases, a seller can achieve a better outcome by checking the current market value for your item. Search "completed listings" to see what similar items recently sold for, then set a higher starting bid, or use a buy it now price.
Reserve Auction Questions and Answers
Q: An auction just ended and the reserve was met. What now?
A: Both parties complete the transaction as they normally would with any other auction. After a reserve auction ends with a high bid that surpasses the reserve, sellers will wait for payment, then ship the item.
Q: An auction just ended and the reserve wasn't met. What now?
A: If you're the highest bidder on an auction that has ended and the listing shows that the reserve price was never met, you're likely out of luck. The seller is not obligated to sell you the item in question at any price, much less the closing price of the auction. You are free to contact the seller and request that they send you a Second Chance Offer to complete the sale (any other method of competing for the sale would violate eBay rules). Sellers who don't use a Second Chance Offer have two other options—they can start over by relisting the item, or they can decide not to sell the item.
Q: I bid on an item, and the auction's still going, but my bid didn't meet the reserve. What now?
A: Now you wait. Don't bid or buy elsewhere until the reserve auction ends. Since the auction is still live, you can't be sure what other bidders are going to do and how the auction will play out in the end. Depending on what others do, you could still end up as the highest bidder and meet the reserve when the auction ends. If that happens, you are obligated to complete the transaction and make the purchase.