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coffee-695545_1280In a conversation with a long-time customer of ours the other day, he reminded me that absentee bidding was once as much a controversial issue as online bidding is now at live auctions.

He said, “There were people, including me, that said we would just go to some other auction where we didn’t have to bid against people who weren’t there.” He added that absentee bidding at some live auctions appears to be just another way for the auctioneer to run the bid or mistreat those absentee bidders.

First, let’s look at the concept of absentee bidding. Absentee bidding is generally thought to be where someone engages the auctioneer to bid for them, since they cannot be at the auction to bid for themselves (or desire to not bid for themselves.)

Some argue that an auctioneer is a dual agent when accepting an absentee bid, and therefore would owe his client-bidder the same duties he owes his seller.

For example, Martin desires to bid on a certain McIntosh Labs MC1201 Mono Power Amplifier in an upcoming auction. Martin cannot stay for the auction, and doesn’t have family nearby who can bid for him in his absence.

Therefore, Martin desires to leave an absentee bid with the auctioneer. Typically, Martin would like his absentee bid to be executed “as if he was there, bidding for himself.” In other words, he may pay as much as $7,000 for this amplifier, but would like to buy it for less if he can.

In our example here, a live bidder at the auction opens the bid on this amplifier for $2,000 and the auctioneer (actually, his clerk) bids $2,500 for Martin. The live bidder bids $3,000 and the auctioneer’s clerk bids $3,500 for Martin … this continues until the live bidder finally bids $6,000 and Martin’s bid of $6,250 is accepted. With no other higher bids, the amplifier is sold to Martin for $6,250.

This is ideally how absentee bids are handled by auctioneers. Why? Because handing absentee bids in this fashion will encourage Martin, and other bidders to leave absentee bids in the future, thus increasing the proceeds for this auctioneer’s future clients.

However, some auctioneers can’t seem to see the forest for the trees. Some say, “I have a bidder at $7,000 on this amplifier, and since I’m working for the seller, I must endeavor to ensure that bidder pays the maximum they are willing … so it is my responsibility to start the bid at $7,000, or make sure that amplifier brings $7,000 in some other fashion …”

This working-for-the-seller argument doesn’t seem to hold water under our analysis:

    • Let’s say this same auctioneer heard that Martin was willing to pay $7,000 for this amplifier, but Martin stayed and bid for himself at the auction. Would it be that auctioneer’s responsibility to ensure Martin paid $7,000?
    • What if Martin had written on a piece of paper his $7,000 bid, but it fell from his pocket, and the auctioneer picked it up, and saw the $7,000 figure. Would it be the auctioneer’s responsibility to ensure Martin paid $7,000?

We would contend that an absentee bid of $7,000 no more entitles the seller to that full price bid than if the auctioneer just overheard someone’s intention to bid $7,000.

However, could an absentee bid be executed in such a way that this amplifier would be opened up for the $7,000 bid? Yes, that could be perfectly legal and perfectly ethical if Martin is advised upon leaving the bid that it will be executed in that manner. In other words, if we have our seller’s and Martin’s knowledge and consent of our policy on absentee bidding — that all such bids will be opened in full at the live auction — then that’s fine.

Of course, Martin (and most all typical bidders) doesn’t like that type of policy, and therefore doesn’t leave an absentee bid, nor attend the auction, and the seller’s proceeds are reduced accordingly.

Which brings us to the material issue about any kind of absentee bid policy. The bidder, leaving the absentee bid, has the right to know the what the policy is, and the right to have the policy executed exactly as the policy dictates. And, so does the seller.

Here’s some examples of absentee bid policies we’ve seen over the years:

    • All absentee bids will be opened at their full amount
    • All absentee bids will be opened at 1/2 their full amount
    • All absentee bids will be opened at $50
    • All absentee bids will be disclosed to the live audience
    • No absentee bids will be accepted for less than $100
    • All absentee bids will be surcharged a 10% buyer’s premium
    • All absentee bidders will be required to leave a credit card for payment
    • All absentee bidders will be required to bid online
    • All absentee bids will (or won’t) be confidential to other absentee bidders

Are any of these above policies acceptable? They all are acceptable, if and only if the absentee bidder has knowledge of them, and consents to them before leaving an absentee bid, and the seller has knowledge of these policies, and consents to them as well.

What’s the best policy we’ve found after studying this issue for decades? It is a policy where bids are executed competitively, as if the bidder was bidding for themselves, with occasionally a minimum amount (to discourage $1 absentee bids, for example) and opening the bid for the absentee bidder at whatever bid they desire, if they desire.

For example, “I’d like to leave $7,000 on that amplifier, and I want you to start the bid at $2,500 …” or not opening the bid with the absentee bidder, but waiting for the live audience to bid, and then bidding against the live bidders with the absentee bidders bid(s).

For those auctioneers who say, “But if I sell that amplifier for $6,250, I’ve left $750 on the table …” think of it this way: Because you treated Martin fairly at the last auction where you had electronic equipment, he’s at your auction today leaving a bid you wouldn’t have otherwise.

Yes, those are trees, and that is a forest.

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.