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I was asked the other day if a bidder bid a negative amount (such as -$50) at an absolute [without reserve] auction, “Is the auctioneer obliged to accept it?”

First, let’s answer if an auctioneer is obliged to accept any bid — positive or negative — at an absolute auction. Most argue that the UCC 2-328 would dictate two answers:

However, our question today is, “What is an auctioneer to do if a bidder bids a negative amount?”

First, if we assumed this was the initial bid, then there might well be no requirement to accept it, but this would then require the auction to continue. If no other bids were offered … over time … then possibly this bid would for practical reasons be accepted, for lack of any other bids.

Secondly, if this was a successive negative bid, meaning a prior bid was accepted, then the negative valued bid would only, and necessarily would, be accepted if the prior bid was less in amount — an even greater negative number.

Before we discuss other aspects of negative bids (negative offers at auction,) it is probably prudent to show that it could very well happen.

Let’s say a house is offered at absolute auction, and there is going to be a 10% or $2,000 (whichever is greater) buyer’s premium added to the final bid price. If the house was in considerable disrepair or otherwise deemed worth less than $2,000, a bidder might well desire to bid -$1,000 to make his ultimate purchase price $1,000 ($2,000 – $1,000.)

For that matter, could an item of personal property be worth so little that the highest bid would constitute the seller paying the buyer to take it away? Certainly, there are items which qualify as worthless, and a cost of removal would make them have a negative position.

Nevertheless, other issues regarding a negative bid do involve the components of a valid contract. One such element is consideration which is deemed “something of value.”

If a bidder only offered -$1,000, is there consideration? It could certainly appear so, as the bidder could cite his promise to take the property away, promise to take title, promise to take over payments or the like, etc. Promises are generally held as consideration if they have value.

Therefore, we find the following:

  • A negative opening bid at an absolute auction could be accepted or refused
  • A negative bid at an absolute auction following another accepted bid would have to be accepted if it was a higher bid, and could not be accepted if it was a lower or equal bid
  • A negative bid at a with reserve auction could be accepted or refused

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 serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.