Simply put, auctioneers need to be concerned with title (ownership) of that they are selling at auction. The burden of title falls on the auctioneer to reasonably ensure he has the authority to sell the subject property and the subject property is free of liens and encumbrances — not otherwise disclosed to buyers.
There is substantial case law all across the United States which suggests as an agent for the seller, the auctioneer is bound to verify title of goods being sold. Most notably is a case we discuss in our Auction Verdicts class known as Deere & Company v. Miller-Godley Auction Company decided June 1, 2001.
For real property auctions, the courts suggest it is the duty of the auctioneer to secure a title search prior to the auction. Further, at personal property auctions, the auctioneer should take reasonable steps to verify title; such would include addressing good (marketable) title in the contract with the seller, and verifying title otherwise when there is the slightest hint title may be an issue.
As such, the general rule to remember is, “When the subject property (real or personal) is typically secured or encumbered, the auctioneer should verify title.” Additionally, the issue of marketable title should be addressed in the contract between the auctioneer and seller. Said another way, wouldn’t you expect a store (a reseller) selling food, decorative items, electronics, clothing, car parts — to have good title? To provide you clear title?
Auctioneers wonder then if title always has to be verified and I would offer — not quite. Selling property where you have actual knowledge of any liens or encumbrances (or the lack thereof) or selling property with values where you can “self insure” against title claims might not justify a title search; and for the latter consideration, is the property you are selling valued at $3? $300? $3,000? $3,000,000? $300,000,000? The question is, “Can you afford the risk?”
We hear the argument as we travel to state and national conventions (and otherwise) that, “We’re just the bid caller …” and therefore title issues are not our issues. I would counter — you are never merely the bid caller. Typically, as an auctioneer you are in an agency relationship with either a seller, an auction company or another auctioneer. Regardless, you are to treat the public with honesty and integrity which would include adequate disclosure or assurances of clear title.
Finally, would a “court-ordered” auction save the auctioneer from title-issue liability? It would seem likely a court would have the responsibility to ensure clear title (or disclose otherwise) in such an auction. Yet, even with a court-ordered auction, it is wise for the auctioneer to verify with the court that title issues have been addressed.
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, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.