Equally, there seems to be lots of confusion. The auctioneer can’t bid; the auctioneer can bid; the auctioneer can maybe bid?
Today, we look at basically five different scenarios:
- Auctioneer accepts a higher bid than the previous bid from one of the registered bidders (legal, customary)
- Auctioneer placing bids for the seller (as a reserve) (legal, in with reserve auctions with authority)
- Auctioneer placing bids for someone other than himself (legal, with authority)
- Auctioneer bidding to purchase (legal with proper disclosure, except in Pennsylvania)
- Auctioneer taking bids which aren’t there (fictitious) to inflate final selling price (illegal)
- In our first scenario where the auctioneer accepts a higher bid than the previous bid … this has been the custom of the United States for centuries. When taking a bid, the auctioneer either is advancing the bid, or accepting an initial bid. There is considerable court precedence that any offer, or any higher offer, must be accepted at a without reserve auction, where a minimum amount in excess of the prior bid is permitted at a with reserve auction.
- In the scenario where the auctioneer is placing bids for the seller, the auction must be a with reserve auction. This is because such bidding constitute a reserve. This bidding must be under the direction of the seller. Normally, this direction would be outlined in the contract between the auctioneer and his client. The exception is a “forced sale” situation where the seller can bid either directly or via an agent no matter the type of auction.
- Where an auctioneer is placing bids for someone else (not the seller,) in an absentee or agency-like scenario, the auctioneer and that bidder must have agreement as to how those bids will be placed. This type of bidding can take place at both with reserve and without reserve auctions. Additionally, the seller and bidders should be provided knowledge and give consent to such bidding.
- Regarding the scenario where the auctioneer is bidding to purchase, this can happen at a with reserve or without reserve auction coupled with the seller’s consent in any state in the United States except Pennsylvania. This seller consent would normally be outlined in the contract between the auctioneer and his client. It is also advisable to alert the customers participating in the auction that the auctioneer reserves the right go bid. We wrote extensively about this here: https://mikebrandlyauctioneer.wordpress.com/2009/11/15/can-the-auctioneer-bid/
- Lastly, the scenario where the auctioneer is otherwise pretending that someone is bidding, when there is actually no bid being offered (almost always where the auctioneer is placing such bids for the sole purpose of inflating the final selling price,) such is illegal in the United States without exception. The Supreme Court of the United States ruled in 1850 that fictitious bids are illegal and that ruling stands today.
In these discussions, it’s also important to identify the parties. The auctioneer in our scenarios above is the one bid calling; (Pennsylvania’s law appears unsettled as it says a licensee can be disciplined if he, “bid[s] and buy[s] for himself at any auction he is conducting.”) These laws were no doubt written with bid calling in mind, but most don’t limit the restriction specifically.
So far as the seller, there are clear distinctions about who the seller is and who the seller is not. We discussed how the actual seller contrasts with other parties here: https://mikebrandlyauctioneer.wordpress.com/2010/03/09/at-an-auction-whos-not-the-seller/
Finally, it’s important to earn the public’s trust to minimize all these types of auctioneer bidding. People who come to buy at auction expect to compete with other attendees, and not the auctioneer. Yet, if the auctioneer’s own bid is higher than any other, then it is in the client’s best interest that the auctioneer’s bid is made.
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. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.