Reserve Price
Synonyms: Reserve، Minimum Acceptable Award Value، Floor Price، Minimum Selling Price
Last updated: 2026-09-25
Short Definition
A reserve price is the lowest price at which an owner agrees to sell at auction; Saudi Arabia's Real Estate Auctions Regulation calls it the «minimum acceptable award value», it must be written into the brokerage contract, and the owner need not sell below it.
Overview
Legal Basis
Article 4(4) of REGA's Real Estate Auctions Regulation (REGA Board decision of 1/12/1444H) requires the brokerage contract to state the «minimum acceptable award value for disposing of the property after bidding», and Article 9(3)–(4) provides that if the auction does not reach the agreed value, either the owner accepts the award in writing at the price reached or the bidding is ended and minutes are recorded, and that the award goes to the highest bidder when the value is reached or with the owner's consent. The regulation rests on the Real Estate Brokerage Law issued by Royal Decree No. (M/130) dated 30/11/1443H. In judicial sales, Article 50(2) of the Execution Law (M/53 dated 13/8/1433H) prohibits sale below the estimated value in the first auction.
Practical Example
The owner of a commercial plot in Madinah auctions it with an opening value of SAR 2,500,000 and a minimum award value of SAR 3,000,000. Bidding stops at SAR 2,850,000 and no one bids higher within the set time. The auction manager refers the matter to the owner, who declines to sell at that price, so the bidding is ended, minutes are recorded and entry amounts are refunded within three working days. Had the owner accepted in writing, the plot would have been awarded at SAR 2,850,000 to the highest bidder. Two months later the owner re-offers the plot with a SAR 2,900,000 minimum and it sells for SAR 2,960,000.
Common Mistakes
- ✗Believing the auction is cancelled automatically if the reserve is not met — the owner may accept the award in writing at the price reached.
- ✗Omitting the minimum award value from the brokerage contract — it is a mandatory term under the Real Estate Auctions Regulation.
- ✗An owner accepting an award below the reserve verbally — the regulation requires written consent.
- ✗Setting an inflated reserve far above the accredited valuation — the auction fails and marketing costs are wasted.
- ✗Assuming a judicial auction has a «reserve» set by the debtor — the first-round floor is the valuation adopted by the execution judge.
International Differences
Reserve prices are common practice worldwide. In the UK a «guide price» is published while the reserve stays confidential, and professional advertising rules generally expect the reserve not to exceed the guide by a wide margin. In the US, auctions «with reserve» are distinguished from «absolute» auctions with no minimum. In judicial sales in Turkey and Egypt, the official valuation serves as the floor. The Saudi system is distinctive in requiring the minimum to be written into the brokerage contract and in giving the owner the choice of written acceptance or ending the bidding with formal minutes.
