Are real estate auctions only for distressed property?
This is a major misconception about auctions. The fact is auctions are the primary sales method when selling valuable assets such as vintage vehicles, multi-million dollar homes, and priceless pieces of art.
What is the auctioneer really saying?
The auctioneer’s chant is a sequence of increasing numbers and “filler words”. The auctioneer’s chant is simply a statement followed by a question. For example: I have 5 dollars. Would you bid 10?
How do you become an auctioneer?
There are auction schools throughout the United States. Class sessions generally run 10-14 days and students learn the elements of being an auctioneer and operating an auction company. If your interested in attending auction school visit www.auctioneers.org.
Where do I find an auctioneer?
Visit the National Auctioneers Association at www.auctioneers.org. Click on the ‘Find an Auctioneer’ link. Search NAA members in your area, or find an auctioneer who specializes in your particular type of auction.
Where can I find auctions in my area?
Visit the National Auctioneers Association at www.auctioneers.org and click on ‘Auction Calendar’. If you are searching for upcoming real estate auctions in your area visit the NAA Auction MLS at www.auctionmls.com.
What is an “Absolute Auction”?
There are different types of auctions (i.e. Reserve, Minimum Bid, etc.). An “absolute auction” is an auction where the property is sold to the highest bidder. Unlike a reserve auction, there is not a reserve price that must be met to complete the auction sale.
What is an “Auction with a Reserve”?
A “reserve” auction means that a price has been set between the seller and the auctioneer that must be met to complete the sale. Reserves are often used to provide the seller with security that they receive at certain amount of money to meet their sale goal.
What does “Minimum Bid” mean?
Minimum bids are routinely used at auctions to provide prospective buyers with an initial price range of where bidding will begin. If an auction has a “minimum bid” of $50,000; prospective bidders will know that the auction will start with an opening bid of $50,000 and that the asset will not sell for anything less than $50,000. Often times, auctions are advertised with an “opening bid”, this should not be confused with a “minimum bid”. An “opening bid” simply means a price where the bidding opens.
Why sell at auction?
Auctions are the perfect answer when you need to accelerate the timeline for selling your assets. Auctions help reduce holding costs and determine the market price of an asset when the value is unknown or when comparable pricing is unavailable.
Am I required to have cash-on-hand at the auction?
Cash payment is not required at auctions. Auction companies accept multiple forms of payment: cash, check, or credit card. When attending real estate auctions, auction companies may at times require a specific down payment on-site in the form of a cashiers check to qualify as a bidder. Financing is available on auction day with many auction companies where lenders can qualify you for loans on-site. It is important that prospective bidders read all documents regarding the sale prior to auction day.
Can I inspect the property I am interested in bidding on before the auction?
We encourage you to view the property before auction day. Due diligence on the part of the bidder is important with auctions. Contact the auction company managing the auction and inquire about times when open houses will take place, as well as any paperwork available on the property. Auctioneers want you to feel comfortable on auction day. Always feel free to call and ask questions.
What is a ‘buyer’s premium ?
A ‘buyer’s premium’ is commonly used in auctions today as a form of payment for the auction company conducting the auction. The ‘buyer’s premium’ is an advertised percentage of the high bid or flat fee added on to the high bid to determine the total contract price to be paid by the buyer.
“If I scratch my nose or wave at a friend, will the auctioneer think I’m bidding?”
We hear this misconception a lot! In fact, to bid at an auction or for your bid to be received by the auctioneer, you typically need a bid paddle or bid card. You will receive this bid paddle or card at registration and it will have a number on it. This number allows the auction company to know who is bidding from their list of registered bidders. If you mistakenly bid or the auctioneer misinterprets your movement as a bid, immediately notify either the auctioneer or their staff.
Can I attend an auction and participate as a spectator and not bid?
Absolutely! We encourage people to explore auctions by attending one as a spectator. There is no better way to learn about auctions then to watch one firsthand.
Who’s the person yelling in the audience at an auction?
The person you see and hear working amongst the crowd of bidders is known as a ‘ringman’. This individual is part of the auction team and is an extension of the auctioneer. The job of the ‘ringman’ is to convey bids back to the auctioneer from the crowd. When bids are received in the crowd the ‘ringman’ will yelp to signal the auctioneer that they have received a bid and to increase the bid amount. These individuals are also there to help answer questions you may have while the auction is being conducted.
Aren’t auctioned properties sold at a discount?
This is one of the biggest misconceptions with auctions. The competitive bidding of an auction and the bidding of prospective bidders sets the price and market value of an asset. The item will not sell for more than the highest bid and will not sell for less than the high bid. You, the consumer, and other bidders determine the market value of an item when you buy at auction.
What does “As Is, Where Is” mean?
One of the most common statements made at auction, “as is, where is” simply means the property is being sold without warranty and that there are no contingencies based on the status of the asset being sold. It is important that you inspect all auction properties before you bid, both real estate and personal property. Photos may not show all the details or potential faults with the asset and it is your job as a well informed bidder to thoroughly inspect and know what you are bidding on BEFORE the start of the auction. Once you bid and buy an asset at auction, you are the new owner.
Auction Glossary
Absentee Bid
A procedure which allows a bidder to participate in the bidding process without being physically present. Generally, a bidder submits an offer on an item prior to the auction. Absentee bids are usually handled under an established set of guidelines by the auctioneer or his representative. The particular rules and procedures of absentee bids are unique to each auction company.
Absentee Bidder
A person (or entity) who does not attend the sale but submits, in advance, a written or oral bid that is the top price he or she will pay for a given property.
Absolute Auction
An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent. Also known as an auction without reserve.
Accounting of Sale
A report issued to the seller by the auctioneer detailing the financial aspects of the auction.
Advertising
Non-personal, paid communication such as newspaper, radio, direct mail and TV directed toward the general public or, in some cases, specific prospective client groups to provide information about the time, place, contents, and arrangements of an auction.
Agent
A person who acts for or in the place of another individual or entity by authority from them.
Appraisal
The act or process of estimating value.
Apprentice Auctioneer
An auctioneer who is in training, or who is operating under the supervision of a principal auctioneer.
‘As-Is’
Selling the property without warranties as to the condition and/or the fitness of the property for a particular use. Buyers are solely responsible for examining and judging the property for their own protection. Otherwise known as ‘As Is, Where Is’ and ‘In its Present Condition.’
Auction
A method of selling real property in a public forum through open and competitive bidding. Also referred to as: public auction, auction sale or sale.
Auction Block
The podium or raised platform where the auctioneer stands while conducting the auction. ‘Placing (an item) on the auction block’ means to sell something at auction.
Auction Listing Agreement
A contract executed between the auctioneer and the seller which authorizes the auctioneer to conduct the auction and sets out the terms of the agreement and the rights and responsibilities of each party.
Auction Marketer
An individual who contracts with sellers for the auction method of marketing property. In the case of real property, he or she may not actually conduct the sale but is directly responsible for all aspects of marketing the property. These individuals must hold a valid auctioneers license.
Auction Marketing
The method of marketing real property utilizing the auction method of sale.
Auction Plan
The plan for pre-auction, auction day and post auction activities.
Auction Price
The price of a property obtained through the auction method of marketing.
Auction Subject to Confirmation
(See ‘Reserve Auction.’)
Auction Value
The price which a particular property brings in open competitive bidding at public auction.
Auction With Reserve
An auction in which the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.
Auction Without Reserve
See Absolute Auction.
Auctioneer
The person with whom the seller engages to direct, conduct, or be responsible for a sale by auction. This person may or may not actually call for bids at the auction.
Auctioneer Subcontractor
An auctioneer hired by the principal auctioneer.
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Ballroom Auction
An auction of one or more properties conducted in a meeting room facility.
Bank Letter of Credit
A letter from a bank certifying that a named person is worthy of a given level of credit. Often requested from prospective bidders or buyers who are not paying with currency at auctions.
Bid
A prospective buyer’s indication or offer of a price he or she will pay to purchase property at auction. Bids are usually in standardized increments established by the auctioneer.
Bid Acknowledgment
A form executed by the high bidder confirming and acknowledging the bidder’s identify, the bid price and the description of the property. Also known as Memorandum.
Bid Assistants
Individuals who are positioned throughout the attendees at the auction to assist the auctioneer, spot bidders and assist prospective bidders with information to help them in their buying decision. Also known as ring-men, bid consultants, bid spotters, or grounds-men.
Bid Caller
The person who actually ‘calls,’ ‘cries or ‘auctions’ the property at an auction, recognizing bidders and acknowledging the highest bidder. Commonly known as the auctioneer.
Bid Rigging
The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value.
Bidder Number
The number issued to each person who registers at an auction.
Bidder Package
The package of information and instructions pertaining to the property to be sold at an auction event obtained by prospective bidders at an auction. Sometimes called a bidder packet or due diligence package.
Bidder’s Choice
A method of sale whereby the successful high bidder wins the right to choose a property or properties from a grouping of similar or like-kind properties. After the high bidder’s selection, the property is deleted from the group, and the second round of bidding commences, with the high bidder in round two choosing a property, which is then deleted from the group and so on, until all properties are sold.
Bookkeeper or Clerk
The person who is responsible for the accounting and paperwork at an auction.
Broker Participation
An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.
Buyer’s Broker
A real estate broker who represents the buyer and, as the agent of the buyer, is normally paid for his/her services by the buyer.
Buyer’s Premium
An advertised percentage of the high bid or flat fee added to the high bid to determine the total contract price to be paid by the buyer.
Caravan Auctions
A series of on site auctions advertised through a common promotional campaign.
Carrying Charges
The costs involved in holding a property which is intended to produce income (either by sale or rent) but has not yet done so, i.e., insurance, taxes, maintenance, management.
Catalog or Brochure
A publication advertising and describing the property(ies) available for sale at public auction, often including photographs, property descriptions, and the terms and conditions of the sale.
Caveat Emptor
A Latin term meaning ‘let the buyer beware.’ A legal maxim stating that the buyer takes the risk regarding quality or condition of the property purchased, unless protected by warranty.
Clerk
The person employed by the principal auctioneer or auction firm to record what is sold and to whom and for what price.
Collusion
The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value or when the auctioneer accepts a fictitious bid on behalf of the seller so as to manipulate or inflate the price of the property.
Commission
The fee charged to the seller by the auctioneer for providing services, usually a percentage of the gross selling price of the property established by contract (the listing agreement) prior to the auction.
Conditions of Sale
The legal terms that govern the conduct of an auction, including acceptable methods of payment, terms, buyer’s premiums, possession, reserves and any other limiting factors of an auction. Usually included in published advertisements or announced by the auctioneer prior to the start of the auction.
Contract
An agreement between two or more persons or entities which creates or modifies a legal relationship.
Cooperating Broker
A real estate broker who registers a prospective buyer with the auction company, in accordance with the terms and conditions for that auction. The broker is paid a commission only if his prospect is the high bidder and successfully closes on the property. Also known as a participating broker.
Critical Path
Sequence of key tasks to be done by auction contractor or other designated parties on specified dates, leading to desired goals.
Dual Agency
The representation of opposing principals (buyers and seller) at the same time.
Due Diligence
The process of gathering information about the condition and legal status of assets to be sold.
Estate Sale
The sale of property left by a person at his or her death. An estate auction can involve the sale of personal and/or real property.
Grounds-men
See Bid Assistants.
Hammer Price
Price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel.
Listing Broker
A real estate broker who has a listing on a property and cooperates with the auction company by allowing the auction agreement to supersede his/her listing agreement.
Market Value
The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.
Memorandum
Sometimes also referred to as a ‘Bidder Acknowledgment,’ or ‘Broker Acknowledgment,’ the memorandum is signed by those parties either on the auction floor or in the contract room.
Minimum Bid Auction
An auction in which the auctioneer will accept bids at or above a disclosed price. The minimum price is always stated in the brochure and advertisements and is announced at the auctions.
Minimum Opening Bid
The lowest acceptable amount at which the bidding must commence.
Multi-Property Auction
A group of properties offered through a common promotional campaign. The properties to be auctioned may be owned by one seller or multiple sellers.
Multi-Seller Auction
Properties owned by many sellers, offered through a common promotional campaign are auctioned in a single event.
No-Sale Fee
A charge paid by the owner of property offered at a reserve auction when the property does not sell.
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Opening Bid
The first bid offered by a bidder at an auction.
On-site Auction
An auction conducted on the premises of the property being sold.
Participating Broker
See Cooperating Broker.
Preview
Specified date and time property is available for prospective buyer viewing and audits. Also known as Open House or Inspection.
Referring Broker
A real estate broker who does not have a listing on a property, but refers the auction company to a potential seller for an auction. Usually earns a flat fee commission for referring product to an auction company.
Regroup
A process used in real estate auctions where a bidder has the opportunity to combine several parcels of land previously selected by other bidders, thereby creating one larger parcel out of several smaller parcels. This process is often used in conjunction with bidder’s choice.
Reserve
The minimum price that a seller is willing to accept for a property to be sold at auction. Also known as the reserve price.
Reserve Auction
An auction in which the seller reserves the right to establish a reserve price, to accept or decline any and all bids or to withdraw the property at any time prior to the announcement of the completion of the sale by the auctioneer. See also Auction With Reserve.
Sale Manager
The person designated by the auction company who is responsible for organizing the details of an auction. Also known as project manager.
Sealed Bid
A method of sale utilized where confidential bids are submitted to be opened at a predetermined place and time. Not a true auction in that it does not allow for reaction from the competitive market place.
Seller
Entity that has legal possession, (ownership) of any interests, benefits or rights inherent to the real or personal property.
Subject to Confirmation
See Reserve Auction.
Tax Sale
Public sale of property at auction by governmental authority, due to nonpayment of property taxes.
Terms
The period of time that an agreement is in effect.
Terms and Conditions
The printed rules of the auction and certain aspects of the Purchase & Sale Agreement that are read and/or distributed to potential bidders prior to an auction sale.
Tie Bids
When two or more bidders bid exactly the same amount at the same time and must be resolved by the auctioneer.
Trustee’s Sale
A sale at auction by a trustee.
Upset Price
Commonly known as the reserve price.
Withdrawal
Failure to reach the reserve price or insufficient bidding.