This typically involves promises between buyer and seller to provide the subject property to the high bidder and making the related payment.
The word “sold” implies the past tense of “sell.” A common definition of “sell” is to:
- “Transfer (property) to or render (services) to another in exchange for money; dispose of to a purchaser for a price.”
So, if an auctioneer says, “Sold!” does that always mean property or services has been transferred, as in transferred to someone other than the seller?
Can an auctioneer say, “Sold!” and not mean it? Absolutely, and here’s why.
There are two types of auctions in the United States. We discussed this here: https://mikebrandlyauctioneer.wordpress.com/2009/11/15/different-types-of-auctions/
Per the UCC 2-328, the seller can bid without recourse at a with reserve auction with adequate disclosure, or at any forced sale. Since the seller can bid, the seller can be deemed the high bidder (the buyer.)
As such, an auctioneer would have every right to gesture to that seller and announce, “Sold!” even though no property is actually being transferred. In fact, the word, “Sold!” necessarily means the aforementioned contract is firmed, and not that the transaction will further close.
However, could one argue that “Sold!” to the seller is misrepresentation? If the seller is both buying and selling … nothing is being sold; nothing is being transferred.
Does the representation that a particular property actually sold potentially suggest others may base future transactions on this information? What if the seller bids far in excess of so-called market value?
When something sells at auction, can others use those results? An auctioneer denotes, “Sold!” for $9,500 at a car auction. Can others assume this type of car in this type of condition is worth about $9,500? If the seller was the high bidder, is such an assumption still reasonable?
Maybe surprisingly to those who think saying, “Sold!” to the seller is misrepresentation … if someone other than the seller bids $9,400, and then the seller bids $9,500, this car is indeed worth about $9,500.
Yet, if the last non-seller bid on this car is $7,500 and then the seller bids $7,600, $7,700, $7,800, $7,900 … $9,200, $9,300, $9,400, $9,500 — does such bidding falsely broadcast this car is worth $9,500 when it is actually worth more like $7,500?
How about this — is the public and/or other bidders to use professed auction results as market value data? If it’s clear the seller can bid in certain circumstances, is it reasonable to burden those watching auctions with the possibility a “sale price” really isn’t?
Further, who would have standing to sue in such a case of misrepresentation? Courts typically require parties have standing — and in a case of an owner acting as seller and buyer, only he would have standing. To have standing, a under-bidder would be required to keep bidding in order to be the buyer …
I would propose this is answered by analyzing the intent of the seller and/or auctioneer:
- If bids are placed/accepted to solely protect a seller reserve (non-seller bids $9,400 and the seller bids $9,500,) then there is absolutely no misrepresentation.
- If the bids are placed/accepted to necessarily falsely represent market value, (non-seller bids $7,500 and the seller bids from $7,600 to $9,500,) then there is misrepresentation.
Lastly, if auctioneers are held to a strict standard of honesty to the public, then even saying, “Sold!” for $9,401 to the seller could be considered technically dishonest if the last non-seller bid is $9,400 and the seller bids $1.00 more.
Would this same technically dishonest standard include the auctioneer announcing to the crowd on December 24 that Santa’s sleigh was seen traversing across the sky to deliver all those toys?
If one considers that there is no material misrepresentation beyond that the property is indeed sold, one could certainly argue that bidders knowledgeable of the seller’s right to bid would consider such inconsequential.
Our conclusions are that auctioneers can indeed legally and ethically say, “Sold!” when the seller is the high bidder, and the risk of misrepresentation materializes as the distance between the last non-seller bid and the seller’s final bid grows.
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 Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.