Guide prices are one of the most misunderstood aspects of property auctions. Many novice investors make the mistake of taking these figures at face value, only to find themselves unprepared when bidding soars well beyond the guide. In this article, we'll demystify guide prices, explain how auction houses set them, and provide strategies to help you interpret them correctly.
What Exactly Is a Guide Price?
A guide price is an indication of where the auctioneer expects bidding to start or the price range within which they expect the property to sell. It's important to understand that it is not a valuation of the property, nor is it a reserve price (the minimum price the seller will accept).
According to regulations set by the Royal Institution of Chartered Surveyors (RICS), guide prices must be an honest indication of the auctioneer's expectations. However, there's still considerable flexibility in how they're set, and different auction houses may approach them differently.
Why Guide Prices Are Often Lower Than Final Sale Prices
There are several reasons why properties frequently sell for significantly more than their guide prices:
- Marketing Strategy: Lower guide prices attract more interest and viewings, potentially leading to more competitive bidding.
- Market Dynamics: In a hot market, competitive bidding can drive prices well beyond initial expectations.
- Deliberate Underpricing: Some auctioneers deliberately set low guide prices to generate excitement and create a sense of opportunity.
- Reserve Price Factors: The undisclosed reserve price is often higher than the guide price, meaning the property won't sell until bidding exceeds this threshold.
Our analysis of UK auction data shows that properties typically sell for 15-30% above their guide prices, with some high-demand areas seeing even larger differentials.
Average percentage difference between guide prices and final sale prices across UK regions (2024-2025)
How to Interpret Guide Prices Effectively
To avoid disappointment and make informed decisions, follow these strategies when evaluating guide prices:
1. Research Comparable Sales
Look at recent sales of similar properties in the same area, both at auction and through traditional sales. This gives you a realistic benchmark for market value.
2. Understand the Price Format
Guide prices may be presented in different formats:
- Single Figure: "Guide Price: £250,000"
- Price Range: "Guide Price: £250,000 - £275,000"
- Plus (+) Format: "Guide Price: £250,000+"
The "plus" format and wide ranges often indicate that the auctioneer expects significant interest above the lower figure.
3. Analyze the Auction House's Track Record
Different auction houses have different approaches to guide prices. Some consistently set guides close to achievable prices, while others routinely set them well below. Study past auctions from the same company to identify patterns.
"The relationship between guide prices and sale prices varies significantly between auction houses. At Auction Insights, we've found that some major auctioneers consistently set guide prices at 20-25% below eventual sale prices, while others tend to be more conservative with a 10-15% differential."
4. Consider Property Condition and Potential
Properties requiring significant renovation or with development potential often see the largest differentials between guide and sale prices. Investors recognize the value-add opportunity and bid accordingly.
5. Set Your Maximum Bid Before the Auction
Based on your research and financial calculations, determine your maximum bid before entering the auction. This helps prevent emotional bidding and ensures you don't exceed your budget in the heat of the moment.
Case Study: The Guide Price Gap
In a recent London auction, a three-bedroom terraced house in Hackney had a guide price of £450,000. After intense bidding from multiple investors, it eventually sold for £625,000—nearly 39% above guide.
Why such a large difference? The property was in a rapidly appreciating area, had planning permission for a loft conversion, and was priced attractively to generate maximum interest. The auction house knew the reserve was set at £550,000, but the guide price strategy successfully created a competitive atmosphere that drove the price well beyond even the seller's expectations.
Competitive bidding can drive prices well beyond guide prices, especially for properties with development potential
The Legal Framework
The Consumer Protection from Unfair Trading Regulations 2008 requires that guide prices not be misleading to consumers. Auction houses must have a reasonable basis for the guide prices they set. However, there's still significant leeway in how they're determined.
In 2019, the Advertising Standards Authority ruled against an auction house that had consistently sold properties for significantly more than their guide prices, considering this practice potentially misleading to consumers. This has led to some auction houses being more cautious in their guide price strategies, but the practice of setting attractive guide prices continues.
Conclusion
Guide prices are a starting point, not a destination. By understanding how they're set and developing strategies to interpret them correctly, you can approach property auctions with greater confidence and avoid the common pitfall of underestimating your required budget.
Remember that thorough research, careful financial planning, and a disciplined approach to bidding are your best tools for auction success. Guide prices are just one piece of a complex puzzle—use them as a reference point, but never as your sole decision-making factor.
At Auction Insights, our premium subscribers receive detailed analysis of guide price trends across different auction houses, helping them make more accurate predictions about likely selling prices. This data-driven approach has helped our clients make more informed bidding decisions and secure better-value properties.
