I think it’s often not seeing the forest for the trees? Yes, auctioneers can reopen the bid (in very specific circumstances) to advance the bid price, but at what cost? We explore here.
First, here’s a consideration — as we published and commented regarding in 2017: https://mikebrandlyauctioneer.wordpress.com/2017/07/28/the-integrity-of-the-bidding-process/.
Integrity and finality in the sale process – also receives serious attention from the courts and, functionally, is integral to the sliding scale approach. “Accepting a late bid may mean more money for [sellers] in the short run, but by upsetting the expectations of those who thought the bidding was at an end, it may in the long term undermine confidence in sales and discourage prospective purchasers from making their best offers in a timely manner.” Ironically, the integrity of the process and respect for bidders’ reasonable expectations is generally consistent with the goal of asset maximization, as most courts have found that the risk of an upset bid stifles aggressive bidding and ultimately results in lost value to the estate.
Otherwise, here’s the costs and benefits of auctioneers reopening bids:
- Possible higher price for that particular lot
- Possible higher commission attributed to that particular lot
- Appreciation from the late bidder
- Likely disenfranchisement of the prior winning bidder
- Can’t trust auctioneer’s statements — when does “Sold!” mean “Sold!?”
- Can’t trust auctioneer’s practice — when reopening is done capriciously
- Rewards and encourages last-second bidding
- Stifles aggressive bidding resulting in lost value to the estate
- Heightened risk of lawsuits involving auctioneer and/or client
- Total auction event time is lengthened
Then here’s the costs and benefits of auctioneers not reopening bids:
- Consistent and firm procedures known by seller and bidders
- Appreciation from the initial highest bidder
- Rewards/encourages prompt/aggressive bidding resulting in higher prices
- Very little — if any — risk of lawsuits
- “Sold!” means, “Sold!” in every case
- Total auction event time is lessened
- Possible disenfranchisement of the late (or other) bidder
- Possible lower price for that particular lot
- Possible lower commission attributed to that particular lot
Finally, I point to two well-respected auction authorities: Steve Proffitt and Aaron Traffas. Steve was an attorney at law, auctioneer and an insightful, respected auction law expert. Aaron is a well-known and brilliant auctioneer / presenter / singer / songwriter / evangelist.
Steve was exceptionally consistent in his teachings that even if/when you believe you can reopen the bid, you shouldn’t. Aaron wrote about this reopening practice from his “customer” perspective, arriving at the same conclusion: http://www.auctioneertech.com/2016/sold-doesnt-mean-sold/.
Our opinion as an auctioneer who’s been in this business over 35 years, conducting auctions all over the United States (and an expert witness and consultant in over 30 high-profile auction litigation cases) is that the integrity of the auction process trumps almost every specific auction’s goal to maximize proceeds by reopening the bid after, “Sold!”
We contend by reopening the bid, confidence is absolutely lost in that auction and damages future auctions (and all auctions everywhere) by lessening faith in us and the process. Auctioneers can ill endure [further] damage to our reputations — nor the integrity of the auction process — by not seeing for the forest for the trees.
Mike Brandly, Auctioneer, CAI, CAS, 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, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.