Absolute auctions attract far more attention than with reserve auctions. Thus, auctioneers understandably use the word “absolute” and the like to attract bidders.
Don’t believe me? Have you have ever seen an absolute auction advertised as a “with reserve” auction with the hope of attracting more attention and more bidders? I’ll answer that for you … you have not.
Yet, here’s the rub. Some of these so-noted absolute auctions are not. For instance, “We’re selling this property absolute over $500,000 …” What’s the issue here? An absolute auction can’t have a minimum bid.
First, here is our treatise on absolute auction and the requirement that they constitute the “Genuine intent to transfer to the highest bidder regardless of price.” https://mikebrandlyauctioneer.wordpress.com/2015/11/27/genuine-intent-to-transfer-to-the-highest-bidder-regardless-of-price/.
Secondly, here is our treatise from over ten years ago where we discussed this unfortunate misrepresentation in the auction industry: https://mikebrandlyauctioneer.wordpress.com/2010/05/15/auction-absolute-over-90000-opening-bid/.
This is not a “license law” issue. Some states license auctioneers and some do not, but all states (Louisiana in part) have adopted the UCC § 2-328 which is state law. As this state law notes, there are two types of auctions and no mention of any hybrids.
Thus in an absolute auction, once there is a calling for bids — the opening of the auction — the property cannot be withdrawn if a bid is made within a reasonable time. In our prior example, once a bidder made an offer of even $1.00 ($49,999.00 less than the minimum bid) this property could not be withdrawn.
That is, unless the auction would not be viewed (or ruled by a judge or jury) as an absolute auction in reality — because it had a minimum bid. You see, here we have an auction advertised as absolute and with reserve at the same time.
Auctioneers like me who have conducted 1,000’s of absolute auctions don’t tend to appreciate those misusing the term “absolute.” We use this word to indicate we are really selling to the highest bidder and when the word becomes diluted with those without the genuine intent to transfer … we all suffer from less confidence in the auction marketplace.
The National Auctioneers Association published an “Official Statement” regarding absolute auctions, consistent with our holding that the term should not be misused, and absolute means the genuine intent to transfer regardless of price: https://mikebrandlyauctioneer.wordpress.com/auction-publications/official-statement-of-the-national-auctioneers-association-concerning-proper-ethical-conduct-for-absolute-auctions-of-real-estate/.
Two notable cases — at the Wisconsin Supreme Court and the Alabama Supreme Court — addressed absolute auctions in this context:
- Zuhak v. Rose 264 Wis. 286 (1953) (Zuhak) https://law.justia.com/cases/wisconsin/supreme-court/1953/264-wis-286-4.html.
- Kinmon v. J.P. King Auction Co., 276 So. 2d 569 (1973) (Kinmon) https://law.justia.com/cases/alabama/supreme-court/1973/276-so-2d-569-1.html.
In Zuhak, the court ruled that at without reserve (absolute) auction, once a bid is placed, seller must convey. In Kinmon, the court ruled that selling absolute means no minimum bid can be guaranteed.
Maybe more importantly, there are no material cases (possibly none at all) which suggest anything else. Selling absolute is purely: No minimum bids, no reserves, no seller bidding …
Any auctioneer advertising any auction as “absolute” or “without reserve” (or other words suggesting such) but not conducting the auction in that same manner risks license jeopardy and/or damages from a lawsuit.
As an expert witness, we’ve consulted in more than one case where this was the central issue. In both, the plaintiffs were rewarded substantial amounts due to — largely — false advertising and misrepresentation.
There is no real issue with having a “with reserve” auction. Some bidders are deterred from bidding with such terms, but some auctioneers have a well established reputation of only taking on sellers with equity and reasonable expectations, thus those bidders participate nonetheless.
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 Supreme Court of Ohio for attorney education.