Auction estimate, reserve and valuation: what is the difference?
- Topic
- Equipment valuations
- Reading time
- 3 minutes
- Last reviewed
On this page
An estimate is an opinion about a possible result. A reserve is a minimum selling instruction under the agreed auction arrangements. The hammer price is the final bid price accepted in the auction. Those numbers perform different jobs.
A formal valuation is broader than a number in a catalogue: its purpose, basis, date, scope and assumptions matter. Do not assume that an auction estimate and a formal report are interchangeable merely because both contain a pound sign.
Follow one hypothetical lot
The figures below are entirely invented. They demonstrate terminology, not typical pricing or reserve practice.
A seller receives an auction estimate of £4,000 to £5,000 for an identified machine under stated assumptions. After discussion, the seller agrees a reserve of £3,800. The opening bid is set separately under the sale arrangements.
Three possible outcomes illustrate the distinction:
- Bidding reaches £4,400 and the lot sells under the terms. The hammer price is £4,400. It is not automatically the amount paid to the seller after fees and other matters.
- Bidding stops at £3,600 and the reserve is not met. The estimate has not guaranteed a sale, and the reserve has not caused a buyer to pay more.
- Bidding reaches £5,300 and the lot sells under the terms. Exceeding the estimate does not mean that every similar machine should now be priced at £5,300.
Read the actual auction conditions for how reserve instructions and sale confirmation operate. BidSpotter's terminology guide provides basic definitions, but it is not the contract for every sale.
Which figure answers your question?
| Question | Figure or information needed |
|---|---|
| What outcome might be plausible? | An estimate with clear evidence and assumptions |
| Below what amount am I instructing that the item should not sell? | An agreed reserve and its terms |
| What did the accepted bidding reach? | The confirmed hammer result |
| What money will the business receive? | Seller settlement statement, costs and payment status |
| What opinion does a lender or other intended user require? | The appropriate valuation instruction and report |
The valuation overview explains why purpose comes first.
Use the distinctions before choosing a reserve
Discuss the estimate's assumptions, current evidence and consequences of an unsold lot. Then use the reserve discussion sheet to record the instruction. A reserve can express a limit, but it cannot establish that the market will reach it.
If an estimate is a range, ask why. The guide to estimate ranges separates uncertainty from different sale scenarios. A range should provide useful context rather than conceal unresolved questions.
After the auction, the results-sheet guide helps distinguish sold, provisional, unpaid and unsold records. Keep those statuses attached to the figures.
UK Auction Group can discuss the kind of opinion you need and how it relates to a proposed sale. State the decision you want the number to support before asking which number is right.
Explore the valuations guides.
Professional reference: RICS.
Sources
This guide gives general information. Equipment-specific, legal, tax and safety decisions may need a qualified adviser or competent specialist. The guides do not promise sale prices, fees or results.