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I’m not sure how to begin this story … other than to say that I had never heard of this type of auction nor this type of bid calling until the other day.

I’m teaching a CE class for a group of auctioneers, when one auctioneer asks me if I’ve heard of “Third bid buys” auctions? I had to ask that she repeat the question, as I wasn’t sure I had heard it correctly. So, she repeated, “Have you ever heard of ‘Third bid buys’ auctions?”

I asked her to explain to me what she had experienced, so she did. She told me that she attended an auction where the auctioneer announced that the “third bid buys” meaning that once a third bid was placed on an item, it was considered sold.

For example, she said, if he (the auctioneer) was selling a folding banquet table, he would ask $100, $100, $50, $50? Then if someone bid $10, and next someone bid $15, and then someone bid $20, the table was pronounced, “Sold!” at $20.

Of course, I asked her, “Why would an auctioneer do this?” “In what way would this benefit an auctioneer’s client?”

She then noted that she felt this auctioneer was doing it for his benefit, and not the benefit of the client at all. She seemed to think the auctioneer himself was interested in the items being sold, and would time his own bid to be the third bid, thus allowing him to purchase items for himself, for less than true market value.

Apparently, this auctioneer was asked by several of the attendees at the auction why this method of “third bid buys” was being employed, and the auctioneer explained that this increased prices, and thus did indeed benefit his client.

I’m skeptical that this method of bid calling, or for that matter, any similar method of limiting the number of bids or bid amounts, would in any way actually benefit the seller. Certainly, some auctions such as sealed bid events cut-off bidding at a certain time, and the highest bid wins; but even those types of events encourage aggressive bidding, and sell to the highest bid, albeit not allowing bids to come in after a predetermined closing time.

This method begs some questions:

  • What if there isn’t a third bid? What if someone bids $100 and nobody else bids?
  • What if someone wants to offer a “fourth bid?” It would only take a few seconds to accept that fourth bid, and in turn get more money for the seller?
  • If this method is used to conserve time, then why not run two rings, or three rings, and allow open, competitive bidding in all three, and save time in this fashion?
  • Why do some auctioneers do things only because they can, even to the detriment of the client?

As I’ve noted, I’m skeptical this “Third bid buys” method was employed for benefit of the client. It seems clear to me some conflict of interest played a part in this scheme. As we’ve previously discussed, auctioneers owe their clients certain duties: https://mikebrandlyauctioneer.wordpress.com/2009/11/18/what-do-auctioneers-owe-their-clients/. “Third bid buys” seems to violate basic fiduciary duty to a client, and make no sense otherwise other than to benefit someone else other than the client.

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.