Of the issues that auctioneering and real estate education share, one is agency. We wrote extensively on agency here:
And, we wrote about a key aspect of an auctioneer’s relationship with his client here:
Despite agency laws being available to all auctioneers, it seems this is one of the most misunderstood legal issues. In fact, one particular agency issue seems particularly misunderstood — obedience.
To demonstrate the level of misunderstanding, let’s explore an example posting on a popular social networking site:
Question for you coin guys. Nice auction this weekend and the seller wants me to sell the Morgan silver dollars as one lot. Only about 12 Morgan dollars. Opinions?
Comment 1: I’ve sold coins for years and you should sell these coins individually. They’ll bring more money that way.
Comment 2: I agree. Lots of buyers will want only one particular coin, so sell them individually.
Comment 3: Me too. There may be one or more Morgan dollars in this lot which are not in great shape, or common. Sell them by the piece.
Comment 4: I’ve sold coins for years. Given these 12 Morgan silver dollars, I would sell them high bidder choice.
Comment 5: I would group the common dollars in one group and sell the other more valuable dollars individually.
Comment 6: The bidders will prefer to have high-bid-choice on these dollars. The high bidder can take 1, 2 or whatever, and then choice the remainder …
Comment 7: You will get far more for these dollars selling them by the piece than selling them as one lot.
Comment 8: I checked your website and you have an 1878-CC that might bring $250. Sell that one separate, and then maybe all the rest choice.
Comment 9: To fullfill your fiduciary duty, you have to maximize price. Selling these coins individually maximizes price.
And so forth …
Essentially all these responses indicate one thing: The auctioneer is to disregard the client. However, the most basic of fiduciary duties is to follow the client’s legal directions (obedience) … the opposite of disregarding the client.
Let’s explore the question again: ” …and the seller wants me to sell the Morgan silver dollars as one lot.” It seems clear the seller is giving the auctioneer a legal direction.
What is an auctioneer’s choice when given a legal direction from his client? Yes, there is a choice: Follow the direction, or be excused from the agency relationship.
Of course, the auctioneer is to provide his client good advice. In other words, it’s fine for the auctioneer to inform his client that, “We’ll likely get more money selling these dollars individually,” if indeed that is the case.
But, it is not proper (or legal) for the auctioneer to dictate to the seller that these dollars are sold individually if the seller maintains his desire for them to be sold as one lot.
Finally, fiduciary duty is important, but such duty is not necessarily to maximize price. For example, the client may wish the home to be empty by a certain deadline in order to minimize expense rather than maximize proceeds. Or, maybe meeting a deadline saves the client possible litigation.
A good rule to remember is fiduciary duty for an auctioneer is — for one — to be obedient. Accordingly, auctioneers are not to disregard their client. Rather, the client’s (legal) wishes are to be followed.
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.