, , , , , , , , , ,

graceAbout one-half of the states in the United States license auctioneers in a fairly comprehensive fashion.

Typical requirements for licensure include auction school, a test, fees, bonding, background check, serving an apprenticeship and/or periodic continuing education.

The other “about one-half” of the states in the United States don’t license auctioneers to any significant degree, or at all.

Some of these non-license states require a permit by county or municipality, or possibly require a license for certain types of auctions, but not much more.

What I’m hearing about is auctioneers acting as such in states which do require a license, but those auctioneers circumventing the licensing requirement.

The methods for this circumvention appear to be one of two schemes:

  1. The auctioneer and seller execute a “power of attorney” document which essentially allows the auctioneer to act on behalf of the seller, more or less as the seller. In many of these license states, a seller can auction his own property, so this power of attorney essentially allows the auctioneer to auction the property without a license.
  2. The auctioneer contracts with the seller to become the owner of the property. Such a contract outlines that the property is sold to the auctioneer, making him the new owner. In many of these license states, a seller can auction his own property without an auctioneer’s license. Upon sale of the property at auction, a certain percentage of the gross proceeds is paid back to the former owner, as outlined in the contract.

It is important to note that a few states have enacted laws to combat this circumvention.

For instance, some states say that property acquired for the purpose of resale cannot be sold at auction except by a licensed auctioneer. Further, a few states say that a “Power of Attorney” cannot be used to circumvent licensing requirements.

However, far more license states have neither of our noted circumvention techniques addressed in their law, than do.

Most state agencies are cash-strapped and severely understaffed to address such issues. Often times, by the time the offender is identified and brought to the state licensing agency’s attention, the auction is over and the offender is long gone.

And, what’s the harm you ask? So what if the auctioneer doesn’t have the state-mandated license? For one, if there is a problem, and especially in the event of non-payment of proceeds, the seller would not have the customary recourse such as filing a complaint, or being insured by the state recovery fund and/or bonding.

As well, if the auctioneer is willing to operate outside the law in terms of licensure, what else is that auctioneer willing to do? A seller may have good reason to worry.

Some offenders have said that it’s easier to go ahead with the auction without getting the required license; they’re glad to pay the fine if caught, rather than go through the rigors of licensing. In other words, some are saying that “It is often easier to ask for forgiveness than to ask for permission.” Grace Murray Hopper?

These same offenders say that if they don’t pay their seller, or otherwise act counter to their seller’s best interest, the seller can still sue them in court, and the auctioneer would still have his or her reputation to worry about — suggesting the auctioneer has incentive to act within the law, even if they don’t have the required license.

We wrote about “Auctioneer licensing — good or bad?” here: https://mikebrandlyauctioneer.wordpress.com/2009/12/25/auctioneer-licensing-good-or-bad/

We’re certainly not suggesting auctioneers use either of these methods to avoid state-mandated licensure. On the contrary, possibly by making those involved in state legislatures and regulatory agencies more aware of these techniques, laws and/or rules can be modified to address these issues.

Further, if and when additional resources are available for enforcement, it might become easier to ask for permission than ask for forgiveness?

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.