Should you disclose your Flippa auction reserve as a buyer?
Should you ask the seller about her reserve price?
Why are sellers acting offended when asked and reply they prefer to keep it private?
Why do potential buyers ask for reserve anyway even if you specifically stated it won’t be disclosed?
If you’ve ever wondered about all these questions and similar ones this post will try to answer them, from my personal perspective as both buyer and seller on many auctions.
What is Flippa Reserve?
Reserve is the minimum price a seller is ready to sell the site for. Once the reserve is met the highest bid will win the auction and the seller will be required to complete the sale. If the bidding didn’t reach the reserve there neither the seller nor the highest bidder has to proceed with the deal.
The seller must set the reserve price to start the auction and it has to be equal or higher than the minimum bid. Flippa terms prohibit the seller from making the reserve public. The reserve also can not be changed after it’s been met, however, the seller may change it at any time during the auction before that. If the reserve wasn’t yet met the seller may choose to lower or increase it during the auction, however, the reserve can’t be changed to below the highest offer. All Flippa auction listings will show if the reserve was met or not.
Seller’s Perspective on the Reserve Price
A seller would usually want to keep the reserve private to make sure he gets more bids and higher offers. So it’s not in his interest to disclose the reserve. Additionally, as you can see from the above Flippa terms it’s simply not allowed to make the reserved public (however personally I’ve never seen or heard of anyone getting in trouble with Flippa for disclosing their reserve price on an auction).
Yet all the buyers want to know the reserve before bidding and more than half of the potential bidders are likely to ask for it – either through a private message or on the listing comments. So it is a question you should be prepared to answer as a seller. Most sellers choose to either disclose the reserve or reply that it should stay private. Another alternative is to provide some indication to the buyers of the reserve range. It’s an acceptable practice in most other auction sites. For example, Sedo.com – the biggest domain auction site – automatically shows the reserve range for all auctions. This way the prospective buyer can know that for example, the reserve for riah.com is in the 5,000 – 9,999 USD range and the reserve for bore.com is in the 10,000 – 24,999 USD range. An alternative acceptable way to provide the buyer an idea of the reserve is to name a more general range like mid $x,xxx, which means the reserve could be $5k, or it can be $7k, or even $2500. The seller can also reply that the reserve is very close to the current bidding, or quite far from it.
Flippa recommends setting the reserve to the lowest price you’re ready to accept to sell the site and that is usually very true as once the reserve is met other buyers will be more interested in bidding, which may cause more bids and a higher selling price than otherwise. The only case when I wouldn’t recommend setting a lower reserve is if you believe there is only a small number of buyers who would make higher bids, so it’s unlikely to cause any sort of bidding frenzy. With very high-value sites, or specific niche sites, sites that require a certain set of skills and experience to manage, and expertise in that niche, you are frequently likely to only get one highly interested buyer (or none, when you’d have to relist). In that case, having a higher reserve will ensure you’re getting a good price. But be careful this is a double-edged sword – more often having a higher reserve will lead to it not getting met. Keep in mind that usually relisted auctions end at a lower price, similar to how houses that were on the market for a longer period of time lose value in the eyes of the buyers.
Buyer’s Perspective on the Reserve Price
A buyer would always want to know the reserve price before bidding for several reasons, for example:
– If the reserve is too high compared to what the buyer was willing to pay he could save time on researching the site, doing due diligence, and deciding on his actual maximum bid. No buyer would want to spend hours researching a site and stats, proofs, and contemplating a $3500 or $4000 bid just to find out late that the seller wasn’t willing to consider anything below $10K for it. This is usually the main reason buyers ask for reserve so it’s fair to provide a range so buyers can decide if they should participate in the auction.
– If the reserve is low (and the bin is not available) the buyer can try to make a BIN offer to the seller and try to buy the site right away. This would save him both time on following the auction and bidding and more importantly, can give him an opportunity to get a good deal if he believes the auction will likely end up higher if let run till the end.
– Also knowing the reserve the buyer will not be likely to place bids until near the end of the auction or until the reserve was reached.
Many buyers usually ask directly on the comments or through pms about the reserve price and get offended and discouraged after being told that the reserve is and will stay private. It’s the seller’s prerogative not to disclose the reserve and moreover, as we’ve learned earlier, sellers are not allowed to disclose it under Flippa rules, so it shouldn’t cause such a reaction.
Then how can you, as a buyer, find out the reserve to save time bidding in an auction you have absolutely no chance of winning? What I usually do is ask the seller if the reserve is far from the current bidding or the bin. Another acceptable way is to ask for the reserve range. It’s not acceptable to simply ask what’s the reserve – don’t do it! The seller may choose not to disclose it and this is still useful since it’ll usually let you know the reserve is relatively high and far from current bidding. If the reserve is close they’ll always let you know.
You can also try to guess the reserve price and then ask the seller if the range is correct – the average reserve price on Flippa is around 10 months’ revenue. If there is a bin the reserve is usually 25-50% lower than the bin. This can obviously vary greatly based on how established the site is and how detailed is the description and stats, as well as the seller, niche, site, etc.
It’s always worthy to get an idea of the reserve price before entering an auction to save time and avoid auctions where sellers have unrealistic expectations.
No Reserve Auctions
Many experienced sellers (myself included) prefer to do no reserve auctions. These involve a higher risk since you’re legally bound to sell the regardless of the ending price and it may end up selling much lower than you expected. However, they also include many benefits:
– having no reserve will get many bids from many different buyers and will cause a lot more people to get involved in the bidding
– receiving many bids your auction can get into the most active auctions list which will ensure higher visibility and a lot more potential buyers seeing it.
– having more bids and a popular auction will also bring a “social proof” to other buyers to bid a higher amount than they usually would have
– buyers are a lot more likely to get into a bidding war and pay more for the site than they would have otherwise.
As examples here are two of my previous no reserve auctions freewaremission.com and thebestwalkingshoes.org and this is a current auction that ends tomorrow (as of the time this post was published): No Reserve – $325/mo Adsense Content Site – Automatic Organic Traffic. Here is also an example of how it can fail kingdoms.info (yes, I lost money on this and the buyer got a great deal, but I learned a good lesson on what not to do..).
Based on my experience no-reserve auctions are preferred when a number of favorable conditions are present for the site and certain measures are taken to ensure its success:
– the site should be a passive income site, preferably with mostly Adsense income, that requires minimum maintenance and no technical knowledge to manage in order to attract the highest number of potential buyers.
– the site should have a proper description and details revenue and traffic stats. Confirmed GA and Adsense are also preferred.
– the seller should have an established Flippa profile with some previous activity so buyers are more confident to bid. Many buyers choose to only bid in auctions set up by reputed sellers – and rightfully so due to the large amount of fraud and scams on Flippa.
– the target price for the site should not be too high to enable people with lower budgets to bid and participate. Preferably under $5-10K since only a small percentage of Flippa buyers are usually ready to go above $10k.
– if you expect at least $1-2K you should use a premium listing. It costs $250 but will be well worth it in the increased publicity.
– it’s essential to try to get as many bids as possible in order to get more views from a high position on the most active list.
– make sure your auction description is well structured to be easily readable. Note: most buyers don’t read the entire description at first, they just look over it quickly to pick some main facts and decide if it’s interesting. You should point out some main details in your description to draw the buyers’ attention. E.g.: recent revenue figures, maintenance requirements, traffic sources.
– add proper revenue screenshots and display other traffic details, including sources as far back in time as you can. Also, confirm google analytics and AdSense stats through Flippa.
– promptly reply to all questions and comments on the listing.
– be only in the last few hours of the auction to answer questions and add/change bin.
– you have to accept the fact that this might fail miserably and you would have to sell your site very cheap if the auction fails to attract enough action. As backing out is not an option be prepared for the worst-case scenario.
– this last part is tricky. As data goes between one third to one-half of all auctions on Flippa end up with non paying buyers, so you should try to sell the site to someone more reputable and more interested to make sure he follows through with the deal. This can be complicated with a no reserve auction so you can message buyers to discuss this and to gauge their interest and reliability. And also set an appropriate bin so the person you’d like to sell it to can buy it.
And one last piece of advice: be cool and use some common courtesy! It’s rather distressing to see buyers who think they are entitled to post whatever they want and so they make comments on listings accusing sellers of fraud and scam or impossible stats with no basis, proof, or even proper analysis – frequently in order to deter other buyers from bidding and get a better deal for themselves or their friend. It’s a despicable practice. Unfortunately, Flippa’s support is usually too slow to reply or intervene, even though they don’t allow this.
TLDR; don’t ask the reserve, ask for the range. Only do no reserve auctions in certain cases. Be polite. Watch my listings
Some great and accurate points here DM. One thing worth pointing out for sellers is that the reserve is defined by the buyer while the final sale price is defined by the market. To this end, the reserve should be the very lowest price you’d accept for your website/domain, NOT the desired sell price.
The primary reason for this that once your auction goes past reserve, it gets a load more interest as it means that the site/domain WILL sell. This means bidding typically goes higher than it would have with a less modest reserve.
Just last week we had a 5-figure sale on an auction that had a 3-figure reserve and over 60 bids. This shows how powerful reserve can be when used well!
Hi Andrew, thanks for the note, very good points, I’ve updated the post to include this suggestion.
I’m glad I found this post because I was confused about reserve prices on Flippa. I saw a listing where the first thing the seller said was “NO RESERVE” before going on to outline the qualities of the site.
I looked back later and that site had not sold, apparently because the bids had not met the reserve price. This didn’t make sense to me because I thought that if the seller had said there was no reserve, then that’s what it meant – no reserve.
I’m not experienced on Flippa, so maybe I’m missing something obvious. What’s your take on this – “no reserve” but “failed to meet the reserve” thing?
This is a really good write up!
I think you’re absolutely spot on to point out that it really depends on how many bidders you can expect to be interested. If you don’t have a broad appeal, you are really opening yourself up to giving away the farm with a no reserve auction.
It’s always going to come down to your unique situation, but here’s how I run my auctions. Either no reserve with a $1 start OR $1 start with a very high reserve.
I definitely wouldn’t start with my lowest acceptable price like Andrew recommends because you can always lower your reserve or BIN mid-auction and that can be a very powerful way to intervene if you time it right.
Don’t forget what Flippa gives you: view count, comments, and watchers to gauge interest.
Also, I think it’s unwise to trust “market forces” because you’re often dealing with only 1 or 2 highly interested buyers. That’s a much more individualized experience not easily described as “the market.”
With a high reserve early on, you will see certain buyers test the reserve. They will bid and bid and bid. It can frustrate certain bidders in a really good way.
Here’s a hypothetical to demonstrate why I like to use a high reserve, if I use one at all.
You set a reserve of $3000, but you’d accept $1000.
A bidder bids, 600,700,800,900,1000,1200,1400,1500, against your reserve.
It doesn’t look like anyone else is interested.
You could drop your reserve down to $1501 to “accept” their offer or let the auction end and try to negotiate with the bidder post-auction.
In this same scenario, if you had a reserve of $1000 and no one else bid. Your buyer would get it at $1000 when they may have gone to $1500 or more.
Alright, hope that adds to the convo.
@Kay McMahon – I guess there were no bids? Sometimes sellers say there is no reserve, however they have a relatively high initial bid, which servers as a reserve. But if there were some bids he must have had a reserve set, otherwise it would have been sold.
@Dan – it is indeed a good strategy! If you have an interested buyer it’s definitely worth setting a higher reserve. You can always lower it, but you can’t raise it higher once the reserve was met.
What happen if I choose reserve price 10$ and someone bid 10$ then my selling close and no one bid or bid option still working?
@Mayank if the reserve is met when the auction is closed, then your sold will be sold to the highest bidder.
You say reserves aren’t allowed to he public and must be at least equal to the minimum bid but there’s this auction where the reserve is public and around 28k, and the current bid is 10. I’m really confused.