There’s no better way to maximize price at auction than selling at absolute auction. What is an absolute auction? It is 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/.
It’s understood that some auctioneers disagree — primarily those who either haven’t tried this method sufficiently or didn’t market that subject property correctly. Here’s our previous treatise on an abundance of auction research concerning: https://mikebrandlyauctioneer.wordpress.com/2021/07/27/which-is-better-for-the-seller-absolute-with-reserve/.
However, as such, some auctioneers advertise absolute auctions which are not — and rather have some sort of minimum bid, undisclosed reserve, and/or seller confirmation. The worst of these bait and switch schemes is advertising (real property) absolute and saying, “Sold!” and then if the seller is not happy, refuse to close.
Coupled with the “if the seller is not happy, we won’t close” is a threat from the auctioneer’s/seller’s attorney that we’ll “tie you up on court” if you sue us. In other words, “Sold!” for $1,250,000 and then just tell the buyer there’s no use suing us [the seller] for specific performance as we’ll countersue, costing you lots of time and money.
Of course, it helps when the auctioneer is an attorney, has an attorney on retainer, and/or in the family. Otherwise, suing with a losing hand can cost more than just paying any sellers any amount needed to make them happy. Absolute auctions do sometimes have third-party guarantors who make up any deficiencies.
Otherwise, to say this is dreadful behavior is an understatement. What all auctioneers need to realize is not all sellers can (or should) sell absolute, and some sellers shouldn’t sell by auction at all. We’ve held an absolute seller must have — at a minimum — sufficient equity, a sense of urgency, reasonable expectations, and of course the genuine intent to sell to the highest bidder.
The courts in the United States appear to be more and more sensitive to false advertising, bait and switch schemes, and related. It would seem to be prudent to avoid implementing this particular maneuver given being “tied up in court” may not be for that long, with the seller being forced to sell. As well, there’s a risk the buyer would be awarded legal fees.
This might be a good time to check your terms and conditions, and if you see any condition on selling absolute, such as “Bidder agrees if the price is deemed insufficient …” (or anything similar) to talk to your attorney about cleaning any of that up, so you’re not sitting in court trying to explain any absolute-auction-hybrid scheme.
Lastly, a “with reserve” auction is an option. With likely fewer participants, this type of auction gives the seller the option to accept or reject the highest bid. This is perfectly legal and ethical, where the “absolute — but we might not close” plan is neither.
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.