- 1. With reserve
2. Without reserve
These definitions are derived from the UCC Section 2-328. This section of law has been adopted by 49 states (all except Louisiana) although Louisiana follows this section generally when ruling on auction cases in courts.
The “with reserve” auction can come in several varieties. Sometimes the owner reserves the right to accept or reject the high bid. Other times, the auctioneer and seller agree to publish a minimum bid that the property will not sell below. Sometimes too, the auctioneer and seller have a undisclosed minimum bid which only they know, and is only disclosed if the bid reaches that amount during the auction, or following the auction.
At “with reserve” auctions, the seller may bid if that right is disclosed to the audience. The seller may withdraw the property from the auction anytime prior to the auctioneer declaring the property “sold.” If the seller bids at a “with reserve” auction, courts have ruled that as a form of withdrawal.
The “without reserve” auction is also known as an “absolute” auction, and there can be no reserve of any kind, including no minimum nor reserve amount. Too, at an absolute auction, someone such as the seller or other party must guarantee that any liens are paid up through the closing of the item (mostly applicable with real estate).
The seller is NOT permitted to bid at a “without reserve” auction, announced or not, unless it is a “forced sale” meaning a sale that is conducted without the consent of the owner (for example, a seller COULD bid on his own car that had been repossessed because the sale of the car is being forced upon the seller without their consent). Otherwise, the seller, nor anyone on the seller’s behalf can bid at a “without reserve” auction as this would constitute a withdrawal of the property.
An interesting difference between “with reserve” auctions and “without reserve” auctions is that in a “without reserve” auction, once the item is put up for sale, and a bid is received within a reasonable time, the item may not be withdrawn.
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.