Auction Software Rules: Reserves, Increments, Premiums

The four rules auction software has to settle before a bid is placed

Before any bid exists, the platform has to answer four questions: at what price bidding can start, by how much each new bid must beat the last, when the lot closes, and what comes off the hammer price before anyone is paid. Everything else - page design, emails, catalog layout - sits on top of those four.

Those settings decide whether a sale runs in an orderly way or turns into a scramble, and they matter the same amount whether you are selling twenty lots or two thousand. The list below is the configuration work worth doing first.

• Starting price or opening bid, which sets the floor for the first bid a bidder may place.
• Reserve price, which sets the lowest figure the seller will actually accept - often different from the opening bid.
• Bid increment ladder, usually tiered by price band, which sets the minimum step between two bids.
• Closing mechanism: a hard close, a staggered close, or a soft close that extends the clock after a late bid.
• Money rules: the buyer’s premium, the seller’s commission, and the order in which both are applied.

Reserve prices: what happens when a lot does not sell

A reserve price is the lowest amount the seller will accept, and it is normally held by the platform rather than shown to bidders. If bidding stops below that figure, the lot closes unsold: no invoice is raised, no buyer is committed, and the seller keeps the item. The software’s job is to make that state unambiguous, because a bidder who thinks they have won a lot that was actually below reserve is a support problem you cannot fix afterwards.

How the reserve behaves in practice is a platform decision, so check it before you rely on it:

• Invisible reserve: bidders are told only that a reserve exists, and a flag - typically “reserve not met” - shows while the price is below it.
• Visible reserve: the figure is shown on the lot page. For high-value inventory this usually works better, because bidders who were never going to reach it drop out early instead of competing for something they cannot win.
• Reserve changes mid-sale: some platforms let you lower a reserve while bidding is open, others lock it once the first bid lands. This matters most in the last evening of a sale, which is exactly when you will want to know.
• Post-sale contact: whether you may approach the highest bidder after a failed reserve is a platform setting, not an automatic right, and it is worth confirming while the catalog is still being built.
• A reserve set too high produces a catalog of unsold lots and the same listing work either way. The number should come from your own record of what comparable lots have achieved, not from the price you hoped for.

Bid increments and proxy bidding

An increment is the minimum step between one bid and the next, and it is normally tiered: small steps at the bottom of a price range and larger ones at the top. Increments that are too small turn a valuable lot into twenty tiny bids and a confusing bid history; increments that are too large stop the price discovering its level. Most platforms default to a sensible banded ladder, and the useful work is checking that the upper bands are wide enough for your inventory.

• Proxy bidding: the bidder names a maximum and the platform bids only as much as needed to keep them ahead. This is why a quiet lot can suddenly jump several increments when a high maximum arrives.
• Bid extension, also called anti-sniping: a bid inside the final window adds time to the clock. Without it, lots are effectively decided by who has the faster connection.
• Buy-now overlays: if you offer an immediate purchase price alongside bidding, check how it interacts with a proxy bid already held. The platform should never sell a lot below a maximum it has already recorded.
• Approval and deposits: on high-value lots the increment ladder matters less than requiring a card on file, a deposit, or manual approval before someone is allowed to bid at all.

Closing mechanics: hard close, staggered close, soft close

The closing rule decides how the final minutes of a sale feel and, in practice, how much of your catalog sells at a full price. A hard close ends every lot at the same instant, which concentrates attention and produces the sharpest sniping. A staggered close ends lots a short interval apart, which spreads bidders across the catalog. A soft close extends the clock on any lot that receives a bid inside the final window, so bidders can respond to being outbid.

• Hard close: easiest to explain, weakest against sniping, and best suited to a small catalog where most bidders want the same handful of lots.
• Staggered close: lots finish one or two minutes apart so attention moves through the sale rather than piling onto one item; good when lots appeal to different buyers.
• Soft close: a late bid extends the clock. It is the standard answer to sniping and usually the strongest format for final price, at the cost of an evening that ends later than the posted time.
• Mixed close: the headline lots on a soft close and the bulk of the catalog on a staggered one. Platforms that support both generally let you set this per lot or per sale.

Buyer’s premium, seller commission, and the order of arithmetic

A buyer’s premium is a percentage added to the hammer price and paid by the winning bidder. Seller commission is deducted from what the seller receives. Both are usually set at the sale level, and the detail that causes disputes is the order the sums are applied in, because a premium on the hammer and a commission on the hammer are not the same as either being calculated on the other.

• Premium on hammer: the winner pays the hammer price plus premium, plus tax and any shipping.
• Commission on hammer: the seller receives the hammer price less commission.
• Processing stacked on top: if the platform charges a percentage and the payment processor charges another, confirm which number each is applied to before you quote a net figure to a consignor.
• One settlement report: the platform should show hammer, premium, commission and net payout per lot in a single view. If you need a spreadsheet to work out what you are owed, that is a software problem worth solving before volume arrives.

The settings to fix before your first sale

• Write the four rules down - opening price, increment ladder, close type and premium - and keep them visible on the lot pages so bidders can read them.
• Run one throwaway lot end to end: bid, win, get invoiced, pay, then check the payout report shows the number you expected.
• Settle your reserve policy before the catalog is loaded, rather than lot by lot on the final evening.
• Check what a bidder sees when a reserve is not met, and what you are permitted to do with the highest bidder afterwards.
• Confirm the platform clock matches yours. The closing time is the sale, and a timezone mismatch is the most expensive small setting on the list.
• Ask what happens to the bidder list, the order history and the settlement records if you leave the platform.