Absolute auctions, by definition, involve selling to the highest bidder. So, if an auctioneer has a current bid of $750,000.00 and a bidder bids $750,000.01 that’s a higher bid. Would the auctioneer have to take this bid of $0.01 more?
Yes, he would, unless he wants to go to court to argue that this one-cent higher bid qualified as trifling (de minimus) and hope the court would rule to exclude this as “not enough more” than the prior bid.
A “de minimis non curat lex” (Latin) evaluation is one where the law does not care for, or take notice of, very small or trifling matters. In other words, the law doesn’t concern itself with trifles. You want a court to rule your next higher bidder offered a trifling advance you didn’t have to accept? Or, that bidder wants a court to rule the opposite?
We’ve advocated staying out of court, and as such, asking a court’s opinion in your particular case would likely result in you being in court. Maybe better to have a “with reserve” auction and not have to worry about it? https://mikebrandlyauctioneer.wordpress.com/2018/07/26/auctioneers-you-want-win-in-court-or-stay-out-of-court/.
Is this a concern for every absolute auction? It’s not — despite what you’ve heard — that bidders will bid $0.01 increments (or maybe $0.005 increments) until the cows come home … most bidders are reasonable about what the next increment (bid) should be. $751,000.00? Better take it.
Auctioneers and sellers have choices. Absolute auctions increase bidder pools, and thus typically result in higher prices. With reserve auctions can also work with low, published [true] minimum bids. Generally, online platforms dictate reasonable increments, but to lessen the chance of an issue, just have a with reserve auction.
As a side note, some state auctioneer licensing agencies have told their licensed auctioneers that they cannot refuse a “trifling” advance at an absolute auction. As such, that $0.01 or $0.005 increment higher bid would have to be accepted. There are other states that have expressed to me that “a trifling advance over the prior bid can be refused.”
The famous Pitchfork Ranch Co. v. Bar Tl, 615 P.2d 541 (Wyo. 1980) case noted that minimum bid increments suggested a “with reserve” auction. Here, an absolute auction was advertised, and as such the property had to be sold “to the highest bidder.” Yet, with a bid of $1,600,000.00, a bid of $1,610,000.00 was refused as not “conforming” to the bid increments.
As with any risk — as the property values increase, so does risk, which may be no better exhibited than in our aforementioned Pitchfork case, which resulted from refusing a 0.625% increase over the prior bid, insisting on a 1.5625% increase. Incidentally, a 0.625% increase on a $1,000 bid would be only $6.25 ($1,006.25.)
In summary, this isn’t really a widespread issue for auctioneers, and there has been very little litigation (or legislative attention) regarding this matter when contrasted with the number and volume of auction sales every day. Live auctioneers selling absolute for decades have learned it’s not (usually) really an issue at all, and online it remains not much of an issue either.
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, Brandly Real Estate & Auction, 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 has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.
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