The fee is a percentage of the gross proceeds. In this case, 20% will go to the auctioneer and 80% will go to the seller.
The auction ends by 2:15 p.m. and the auctioneer takes all the gross proceeds ($32,250) and deposits it in his escrow account at his bank just before their 3:00 p.m. closing time.
Then, the auctioneer takes his 20% ($6,450) and puts that in his own personal account and withdraws $500 of that money in order to take his staff out to dinner later that night.
Has a crime occurred here? I don’t think so.
Some say the auctioneer can’t pay himself (or herself) until he pays his client; in other words this auctioneer must leave this $6,450 in his escrow account until this $25,800 is dispersed to his client — and only then may he move his $6,450 to his personal account.
In fact, there is generally no regulation of this process in the United States. Instead, largely this would be a matter for the contract between the auctioneer and his client.
How practical would such a regulation be? Not very.
- Many times expenses have to be paid fairly soon following the auction, and are sometimes paid from the commission. Further, if a seller wished to delay disbursement, this could further complicate timely payment of expenses.
- Auctioneers often get marketing money or other fees up-front — long before the auction even takes place; would this be considered the payment of commission prior to disbursement?
- What if an seller wished to pay the auctioneer a flat fee prior to the auction? Would that be allowable?
Some say, “This money doesn’t belong to the auctioneer until he pays his client …” Actually, one could argue that the auctioneer earned that commission the moment he said, “Sold!” Or, the auctioneer earns that commission whatever moment the parties agree he does.
It is worth noting that some court-ordered auctions do require the gross proceeds in total to be paid to the court, and then expenses and commissions are paid thereafter. A good example of how court orders can — and do — supersede state law and even private agreements.
Nevertheless, it seems this is best a private matter, and not one generally regulated, nor deserving of such. When, exactly, can the auctioneer take his commission? The best answer might be, “When the client says he can.”
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.