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Sound confusing? It did to me also.

Apparently, on July 11, 2010, a well-known real estate broker and auctioneer was hired to market and sell at auction 18 condominium units in Texas.

The auction was advertised as an absolute auction, and further noted that there would not be any minimum bids. The seller had signed blank sales contracts prior to the auction — awaiting the final bid prices and names of the buyers.

Bidders were required to tender $10,000 cashier’s checks in order to participate. The auction began, and the condominiums were sold. The auction resulted in sale prices about 50-60% of previous listing prices.

Soon after the auction, the seller sued the buyers, citing:

    “The sale contracts will not be honored.” Further, the lawsuit said the July 11 auction “was generally confused and resulted in prices well below market values” that the seller “had been assured it could expect to receive.”

While virtually anyone can sue anyone, we find this lawsuit confusing and misplaced.

  • If the seller doesn’t want to close, then he can do just that — not close. As a result, the buyer(s) can sue the seller for non-performance, rather than the seller suing the buyers claiming his own non-performance.
  • If the seller has been “assured of certain prices,” then this wasn’t an absolute auction contract arrangement between the auctioneer and the seller. Absolute auctions cannot assure sellers any certain amount.
  • The seller claimed the auction, “was generally confused and resulted in prices well below market values.” While I wasn’t at the auction, it would seem difficult to imagine what is meant by, “generally confused.” Further, prices were, “well below market value?” Rather, I suspect the previous listing prices were well in excess of market value.
  • If a seller feels harmed by confused auction procedures and/or prices well below what was assured, the harm would be caused by the auctioneer, and not the buyers. Yet, the buyers are sued instead?

Brian Rider, an adjunct professor of real estate law at the University of Texas Law School was quoted indicating that he knew of little auction case law in Texas. There is probably little auction case law in Texas of material nature.

More material however, was that Professor Rider added, “the seller can stop an auction at any point until the hammer falls.” This is contrary to Texas law § 2.328 which clearly states:

    In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.

Of course, some argue that the UCC 2-328 doesn’t apply to real property, but the courts have consistently disagreed.

We wrote about “When & Where: The UCC 2-328 applied to real estate” here: https://mikebrandlyauctioneer.wordpress.com/2012/01/07/when-where-the-ucc-2-328-applied-to-real-estate/

Professor Rider added more thoughts which included that the seller was, “blaming the victim” by suing the buyers. He also said a seller “certainly has the right to sue his agent or employee” if he thinks the auction was mishandled. “But I don’t know that that allows him to negate contracts he signed with innocent third parties if they just showed up and bid at an auction.”

Sued for buying too cheap? Apparently so.

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 Greater Columbus Auctions and Goodwill Columbus Car Auction and. 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.