The two structures
A reserve auction sets a minimum acceptable price. If bidding does not reach the reserve, the seller is not obligated to sell. An absolute auction carries no reserve: the property sells to the highest bidder regardless of price, once bidding opens.
Why a reserve protects the seller
A reserve, grounded in a documented opinion of value and current market underwriting, protects a seller from a result below defensible value. It is the more common structure for assets where the seller has a floor they are not willing to go below.
Why an absolute sale can draw more bidders
An absolute auction signals certainty of execution. Because bidders know the property will sell, an absolute structure can draw a wider and more motivated field of qualified buyers, which sometimes produces a stronger result than a reserve auction would, even without a stated floor.
How the choice gets made
The decision is made during the structuring step of a disposition, after assessment and valuation have established what the asset is worth and how much certainty the seller needs against how much upside they are willing to risk. There is no universal answer. A lender moving a large REO pool under time pressure may favor an absolute structure for speed and certainty, while an estate liquidating a single well positioned asset may prefer the protection of a reserve.
Either way, the process is documented
Whichever structure is chosen, the reserve strategy, or the decision to run without one, is supported by current market evidence and documented in writing before marketing begins.