Armed with the most powerful marketing method that exists, Auctioneers all over the world know in order to maximize results for their clients, they must maximize interest in those items. More bidders means more money, just as fewer bidders means less money. The larger the number of bidders, the more competition there is, especially as the bidders sense that the other auction attendees are interested in the same item as they are. And, as we all know, emotions are involved when it comes to bidding at auction.
There is no other aspect of a public auction that attracts attention more than buyers feeling as if they might “get a deal” on something they want. The prospect of a deal is what drives bidders to auctions. Sometimes they feel as if they get a deal, sometimes they don’t, but getting them there is essential to competitive, top-dollar bidding. When sellers place restrictions on the sale of their item at auction, such as a minimum bid or reserve bid, buyers are much less likely to participate because they feel that it removes the “prospect of a deal” component.
For sellers to maximize attention, they need to minimize the restrictions upon the buyers. Auctioneers cannot make bidders bid, but they can see to it that a large crowd shows up auction day to participate. Although many things factor into a buyer’s decision whether to attend an auction, the one restriction that deters more buyers than any other is an auction where the seller might not accept the high bid for their item.
Equipped with this timeless truth, Auctioneers know that an “absolute” auction will attract more buyers, and more money, than one that isn’t advertised absolute. The mere sight of the words, “Selling Absolute” in an auction advertisement gets the heart rate of buyers racing. You could compare the absolute auction advertisement to one that says “You might win the lottery.” Wouldn’t a reserve auction advertisement suggest “You probably won’t win the lottery!?”
Most everyone in our industry knows that the market determines the value of something. At an auction, our market is a pool of registered bidders ready and willing to buy that “something.” With a larger bidder pool, we have a larger portion of the market looking at our auction items. Even one bidder can make a material difference in the prices realized at auction. Yet, can we get everyone to attend? Not hardly, but we can get a larger crowd – a larger market – and be much more assured that market values were realized.
The UCC 2-328 defines some basic rules for an absolute auction: Once the auction is opened, and there is a calling for bids, the item must sell unless no bid is received within a reasonable time. As well, if we assume that by the seller bidding, a right of withdrawal is being invoked, then the seller cannot bid at an absolute auction – other than at a forced sale (auction). Lastly, it is clear that an absolute auction can be cancelled (withdrawn) prior to the opening of the auction – or calling for bids. In other words, if a seller doesn’t want to sell their item at an auction that has been advertised as absolute, they must decide before there is a calling for bids, or hope for a very quiet reasonable time thereafter.
Along with many states, the National Auctioneers Association (NAA) has furthered the rules for absolute auctions to include:
No auction should be advertised “absolute” or “without reserve” unless there is a bona fide intent to transfer ownership at the time of advertising and at the time of the auction, regardless of the bid or bidder.
An absolute auction should not be held when there are liens or other encumbrances on the property, unless a financially responsible party signs a binding commitment to guarantee that all liens will be paid regardless of the high bid.
If we were to summarize the UCC and NAA’s position, it might be as basic as:
“At an absolute auction, if the auction is opened up and there is a bid within a reasonable time, the item must sell without any reserve whatsoever.”
However, as we all know, it isn’t quite that simple. Unfortunately, we all see absolute auctions conducted with:
- Minimum opening bids,
- Seller confirmations, or right of withdrawal,
- Seller bidding, or bidding upon the seller’s behalf,
- Liens – either latent, and/or part of the purchase,
Why do we see these misuses of the absolute auction format? It may be that those Auctioneers have clients who are appropriate for a “with reserve” auction, but want more bidders in attendance and increased bidder reaction. Yet, as this logic is applied, it makes it difficult for the word, “absolute” to maintain its true meaning in the marketplace. This harms those sellers who truly want (and deserve) the advantages of absolute auction marketing.
Too, it may even make particular Auctioneers subject to doubt or question. For instance, if an Auctioneer advertises an absolute auction, but doesn’t sell due to the seller not being happy with the high bid (or whatever reason), then what about the next client, and their wishes to take advantage of absolute auction marketing? Do we really think buyers are so ignorant? Isn’t it reasonable to think a buyer at the first advertised absolute auction would think the next one wasn’t really absolute, either?
Is it hard to get a crowd at a “with reserve” auction? Not necessarily, as the actual reserve can be conservative in nature (such as a $100,000 home selling for at least $50,000) or otherwise trifling. However, as the reserve becomes more material in the minds of potential buyers, the less likely they are to participate. I would suggest we need to always keep in mind that not all sellers are appropriate for auction marketing, rather than trying to dilute the true definition of an absolute auction by using terms that do not belong in an absolute format. For example an absolute auction with a “minimum opening bid” or “selling subject to” is not an absolute auction at all. If a seller is not comfortable with a true absolute auction, then another format should be used, whether it be a reserve auction or in some cases, no auction at all.
Trust is one of the essential elements of an Auctioneer. Sellers have to be able to trust their property will be marketed properly and the proceeds handled correctly; buyers have to be able to trust their bids will be taken fairly and ethically and that what has been advertised is truly being offered. Lacking either of these components, it’s not difficult math: No buyers equal unhappy sellers. No sellers equal no auctions.
Why would we want anyone walking away from our auction saying, “I thought this auction was advertised absolute, but there were minimum bids?” or worse yet, “If I ever need to hire an Auctioneer, it certainly wouldn’t be this one.” Many potential clients are customers today in your auction crowds, and don’t think for a second they aren’t evaluating you, your staff, the prices, and their future utilization of your services. It’s rare for a potential client to call and say that they want to use your services due to their less than-ideal experiences attending your auctions.
On the contrary, it is really quite simple. By selling real or personal property absolute (truly absolute), the crowds are larger, the prices are higher, and your seller is happier. As well, more in attendance walk away and say, “Well, prices were high, but if I ever need to hire an Auctioneer, that’s the one I’d hire.” Could any Auctioneer describe an absolutely better day than that?!
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.