Auctions in the United States are of two types: with reserve and without reserve per the adoption of the UCC 2-328 by 49 of the 50 states. Our topic today regards when the auction is a forced sale, and if that changes the general rules of how auctions work?
In a forced sale, the property is being sold involuntarily. In other words, the property is selling at auction because of a court-order or other such authority, without the consent of the seller. Common forced sales in the United States include:
- Foreclosure auctions
- Repossession car auctions
- Tax lien auctions
- Partition-by-sale court orders
- Other court-ordered auctions
What is important about a forced sale auction, versus other types of auctions, regards if the seller is able to legally bid at the auction. At auctions which are not forced sales:
- With reserve auction
- The seller may bid only if that right is disclosed to the other bidders to avoid buyer recourse
- Without reserve auction
- The seller may not bid
However, at a forced sale auction, these rules change:
- The seller may bid regardless of the auction type; no disclosure required
In the forced sale auction, the legal presumption is that since the seller is selling involuntarily, the seller has the right to protect his interest(s) by bidding.
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.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.