Home sale myths: does the vendor have to set a reserve?

It is a common perception that the vendor has to set a reserve before they sell their home because it is common practice – however, this is not the case.
The vendor can establish the ‘reserve price’ at any stage during the sale process but most wait until they have seen the level of interest through enquiries and open-house attendances.
This is case for two reasons: first, the law does not require it; and second, unlike a private sale where the price on the advertisement is the price the vendor will sell at, through an auction the vendor is discovering what the market is willing to pay.
In the event that they set a reserve, there is no requirement for them to keep the same reserve until the day of the auction – the vendor can vary it at any time. Indeed, a reserve set on day one, two or 20 of the auction campaign provides no surety about the final sale price.
In a strong market, such as the one in Melbourne right now, the market often exceeds vendors’ expectations but in a soft market – for instance, in 2000 or 2008 – vendors frequently lowered their expectations to meet the market.
Regardless of the reserve, unless otherwise instructed the auctioneer will not ‘knock the house down’ until they have sought and received the vendor’s approval.

Source: reiv.com.au