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As we wrote about offers prior to an auction (Offers prior to an auction,) and whether or not such an offer commenced the auction itself, or otherwise bound the auctioneer and seller to applicable law, are there times when an item, personal or real, can sell prior to auction?

Sure.

First, when an auction is scheduled — any auction — the seller (owner) has the right to withdraw any item from the auction before the auction begins, and even withdraw any item up until the auctioneer says, “Sold!” in a with reserve auction. All this is noted quite clearly in state law as an adoption of the UCC 2-328.

Therefore, unless the seller has contracted otherwise with an auctioneer, and waived their right to withdraw items prior to auction (and this is found to be enforceable, see: Can the auction seller waive rights granted under state law,) then the seller could simply withdraw the item, and then sell it otherwise.

In some cases, auctioneers contract to sell personal or real property at auction, and include a clause in the contract with the seller (owner) that the property is subject to prior sale. In this way, the auctioneer typically earns his commission regardless if the property sells prior to auction, or on auction day. The seller enjoys the benefit of having his property available for a desirable pre-auction offer or to the highest bidder at auction.

As we discuss offers made prior to an auction, it is important for all auctioneers to distinguish if the offer is to either:

  • Buy the property, and cancel the auction
    or
  • Bid on the property at the auction

While we’ve hinted at some advantages for the seller in structuring their auction to either accept offers prior, and cancel the auction, or wait until the auction and sell it then, are there disadvantages?

Yes.

When the public sees an auction advertisement for August 15 at 1:00 p.m., they generally expect whatever is being sold at that auction to be there, available on August 15 at 1:00 p.m. By selling any property prior to the auction, it instills in the public a distrust that we as auctioneers have on the one hand, said something is selling on August 15 at 1:00 p.m., and on the other hand, sold the property at some other time, prior to the auction.

While many auctioneers will note in advertising that whatever is “subject to prior sale,” still some either ignore or don’t realize the probability of such a situation, and think more-so that the auction will take place, and their opportunity to purchase will be on that day.

Can it sell prior to auction? Generally, yes it can, and possibly this can benefit the seller in this particular case. However, with this benefit comes a price for other sellers when buyers start to suspect property advertised for auction may not be there on auction day.

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.