Most agree that the Uniform Commercial Code (UCC) suggests that by default, once an auctioneer says, “Sold!” title transfers at that time with the exception of property sold with a document of title (UCC § 2-401(3)) where title transfers at the time of delivery of those document(s) — or for items being shipped (UCC § 2-401(2)) either at the time of shipment or time of delivery.
If an auctioneer transfers title at the time of “Sold!” then it generally becomes the buyer’s responsibility to secure and protect that property. However, if an auctioneer transfers title at the time of subsequent payment, it remains the auctioneer’s/seller’s responsibility to protect that property until payment is made.
What are the risks? If title transfers immediately, the risk is the buyer owns the property but doesn’t pay. If title transfers subsequently and necessarily after payment, the risk is the property is lost or damaged while in the actual or constructive possession of the auctioneer/seller.
Yes, life has risks, and auctioneers/sellers must decide if they want to assume the risk of non-payment or property loss or damage. I suspect most auctioneers would rather risk property issues versus non-payment? This decision would obviously depend upon the value and nature of the subject property.
When the auctioneer/seller is still in possession of the subject item, the other advantage of passing title only until after payment is that if payment is not forthcoming, the seller remains in title and the property can be resold to mitigate damages.
If title passes at “Sold!” and payment is not forthcoming, an auctioneer might (or might not) need the buyer’s consent (abandonment / otherwise) to resell (UCC § 2-706). We wrote more about that here: https://mikebrandlyauctioneer.wordpress.com/2020/11/25/auction-buyer-didnt-pay/.
It would appear obvious to us that if the buyer intentionally has possession of the subject property without payment and lacking title, the issue might be conversion (theft.) Such unintentional actions might constitute an oversight or misunderstanding, which can often (hopefully) be resolved.
With more and more being sold at an online auction — versus a live auction — with shipping involved (as well as from a live auction) to the destination of the buyer, title would pass at delivery, where the payment was surely secured prior to shipment.
Shipped and delivered items where the buyer rejects the subject property due to it being non-conforming (UCC § 2-602) can be reimbursed for the purchase price if such notice is within a reasonable time following buyer inspection. Of course, the buyer then would have to safeguard the property for the seller’s benefit.
If a buyer receives the subject property and has the reasonable opportunity to inspect, and does not notify the seller the property is non-conforming soon thereafter, acceptance is assumed whether conforming or not. For a live auction with reasonable inspection opportunities, this issue is largely moot.
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, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.