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auction, Auction Law, auctioneer, auctioneers, auctions, bidders, buyers, courts, disclosure, forced sale, forced sales, last good faith bid, state law, types of auctions, with reserve, without reserve
When sellers consign or otherwise relinquish their property, real or personal, to be sold at auction, they are giving up rights to that property.
One right that is sometimes given up, but other times not, is the right to bid on that property at the auction.
Why do sellers want to bid on their own property at auction? Several possibilities exist:
- To make sure it demands a certain price, or otherwise they’ll retain ownership
- Because they have changed their mind about selling that property, and wish to keep it
- They wish to avoid a certain other person or entity from acquiring ownership of their property
- To increase the “apparent” market price of such property
For these or other reasons, sellers do wish to bid on their own property at auction, and do.
What do the laws in the United States, and what have the courts in the United States, said about such practice? Basically, the courts have consistently stated that:
- By the seller bidding, either himself or by proxy, such action constitutes a reserve
As we know, there are only, and distinctly two types of auctions. We discussed this in our article about the Different Types of Auctions. Auctions are either with reserve, or without reserve; period.
Therefore, if the seller bids then a reserve has been placed on the property selling — thus the auction would have to be a “with reserve” auction, and not a “without reserve” auction.
What does state law say about the seller bidding? First, almost all state law says that if the seller may only bid at a “with reserve” type auction. Secondly, that if the seller wants to reserve the right to bid, that such must be disclosed to save oneself from the high bidder taking such property at the last good faith bid prior to the seller bidding or voiding the sale altogether.
However, there is a consistent exception to all of this, which state law and the courts have upheld. At a forced sale, no matter the type of auction, the seller may bid without any disclosure. Such auctions are often court-ordered events, such as foreclosures, repossessions and the like. We discussed this in more detail in our article about Auctions and Forced Sales.
Auction bidders detest the seller (the owner) bidding on property in which they (the bidders) are interested. Few things deter bidders from an auction to any larger degree than sellers bidding, or otherwise protecting their property from bidders.
While it is difficult for auctioneers to determine if sellers are bidding at a live auction, especially if those sellers are bidding by proxy, the Internet has opened up an almost completely undetectable method for sellers to bid undetected by auctioneers.
Most experienced auctioneers have a pretty good sense if the seller is bidding or if someone is bidding for the seller at a live auction. Facial expressions, bidding habits, posture, eye contact, and other mannerisms contribute to the data auctioneers use to determine if the seller or proxy for the seller is bidding.
The Internet allows bidders to hide their appearance completely, and also hide their identity, thus contributing to more undisclosed and illegal seller bidding than ever before.
Sellers can bid at a with reserve auction with no recourse so long as the right to bid has been disclosed to the other bidders. Too, sellers can bid at forced sales. However, state legislators and the courts have been clear that otherwise, the seller cannot bid on their own property at auction minus buyer reward.
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.
Mike Brandly, Auctioneer Blog 
we are running across a situation here in Tn that word is the AUCTIONEER has ‘guaranteed’ the seller of a real property a certain price, DESPITE the auction being advertised as ‘absolute’.. must he disclose this? does this now make this auction a ‘reserve’ auction? does this make the auctioneer the ‘proxy’ of the seller?
please let me know as soon as possible as this auction will take place next week. thank you!
Per state law in all states except Louisiana, and court rulings in many states, an absolute auction cannot have a price guarantee for the seller, nor a certain price which must be exceeded by any bidders. Absolute auctions must be absent any reserves. What you describe is a reserve auction being advertised as an absolute auction, which constitutes misrepresentation.
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I fully understand and agree that the seller has the right to put on a reserve. But I do not agree about putting a proxy in to jack up the bid as was the case at the last Camp Barb auction I went to without disclosure as to who he was yet the assisting auctioneer new him and assisted him on jacking the bid up urging you to bid just one more time. And then the proxy pretended to have paid the owner in cash instead of paying out at the cashier
There seems to be a trickster insider loophole embedded into the local auctioneer process lately. Auctioneers sometimes set up conditions whereby interested bidders are minimized so that insiders within the auction house can bid and buy items cheaply. Even though the items sell, the bidders are basically reduced or limited to insiders.
A recent yesterday example is where a local auction company offered a huge coin estate for sale, the type of auction consignment that may come along only once in a lifetime to them, including 5000 Morgan and Peace silver dollars, 1400 rolls of 1964 or older silver half dollars, CBOT silver bars, numerous individual coins, gun collection, knives, vehicles, etc. The auction was entirely online but we were able to view the items beforehand to identify any lots we were interested in. This auction was highly publicized on a local radio station. We were instructed to register online.
Unfortunately, my bids were prevented from going through via a process that any ordinary person would likely write off as a computer glitch. However, I was issued a bidder number and username, but each time I used it while the items were live, I received a page that first asked me to agree to their rules, which I did, and then it switched to another page saying there was a problem with my username or password, which was not the case. I even re-registered and received the identical same results. I had spent an hour reviewing their website and around 3 hours viewing lots and another 3+ hours trying to bid, but never got past the half dollar page as none of my bids would process.
There were several people to contact by phone, but all of their phone numbers gave the same message to the effect that they wanted to help you and to leave a message, and then followed by a message that their inboxes were full, similar to what I often get at the VA. In this fashion, all of the phone numbers were not functional during the auction and I did not try them again afterwards as I prefer to remain anonymous for now.
I was interested in many of their lots/items, all of which closed below my bids. This would hurt the consignor and the general public, and the auction house if it was a legitimate auction. It would not hurt auction house insiders. It smells of an insider fraud but how would one ever prove it? Big ticket items sold very well as the consignor was likely aware of what they would bring. Individual generic items and rolls except for a few items like 3 slabbed Carson City dollars, went for amounts one might expect if you held the sale at a very bad time, which it was not.
On a prior occasion many years ago my family had auctioned off some business inventory through a second different auction company and the accounting, which consisted of a box of disorderly sticky notes, was such that it was near impossible to correlate the various lots and dollar amounts. We were there but we figured that we finally ended up with about a third of what we thought we should have received based on the items sold, but again no way to prove otherwise.
Then a few years ago we also, through another third auction company, sold property of a 90+ year old elderly relative, or 70+ year accumulation. His property was around 15 miles from a population center of around 100,000 people. They then divided the property into two sales but moved much of the property to a small difficult to reach town of 3000 people about 50-60 miles away, telling us they had better results on prior auctions there. Many items there sold for tiny amounts such as 50c for a garden tractor or boxes of tools, etc. I assume an auction house insider scheme played a part there as well, but again there is literally no way to prove these things.
I like auctions that are cleanly done and they do exist. Is there any way we can stop the insider corruption, misrepresentation and fraud that is going on and that now seems to be rampant among many of these local auction houses?
One thing we can be sure of, these crooks are going to hell when they die! Saved people will not commit such acts without great discomfort, therefore we can assume that only those who are lost in their sins would commit such an act. Remember only a remnant will be saved. It is a terrible price to pay for spending eternity in hell! Stealing just doesn’t pay in the end!