Auctioneers are also sometimes paid when property doesn’t sell.
Paid when property doesn’t sell? Yep, even when it doesn’t sell.
Actually, it takes the nearly identical effort (if not more) to not-sell something than it does to sell something. All the marketing, preparation, day-of-auction activities are likely the same, and then maybe even more effort and time to not reach the reserve and then either try to put a deal together, or pass the property.
But more importantly, something else happens when property is put up for auction and doesn’t sell. Justin Ochs and I discussed this a few years ago … and we agreed that confidence is lost in the auction method of marketing when property doesn’t sell.
I wrote about that phenomenon here: https://mikebrandlyauctioneer.wordpress.com/2011/10/30/has-the-reserve-confirmation-system-decreased-the-buyer-pool/
However, our topic today concerns auctioneers enriching themselves for not selling property. While it appears to be widespread, I wonder if the gain in commission isn’t dwarfed by the damage to reputation and diminishing confidence future buyers and sellers have in the auction method of marketing.
Further, auction attendees are likely not aware that the no-sale results in a fee, and might view this way of “maybe selling their property” as preferred. And bidders likely view this “maybe selling property” as much less enticing — encouraging them to find a different auction and/or auctioneer next time …
As a result, sellers might actually be unknowingly leaning towards this method of marketing which results in less demand and lower prices. More importantly for auctioneers, could it be when they earn a no-sale fee, it results in a long term loss of income?
Generally, what happens when anyone is paid to “not perform?” College football coaches get paid when they are not performing, but usually lose their jobs soon after … Doctors who regularly don’t solve health problems might earn fees for a while … Attorneys who repeatedly charge to lose cases aren’t’ usually in business long … so why would auctioneers be an exception?
I suspect auctioneers are no exception whatsoever. In fact, in my travels all across the United States, I have encountered numerous auctioneers who have either changed their models to selling everything without reserve, or even closed their doors due to too many no-sales.
Charging a no-sale fee to not perform? Maybe a better long term strategy would be to not engage clients with property which won’t sell — and charge to perform, rather than not?
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.