Sellers are using auction marketing more and more as they see how this method of selling real and personal property delivers market value quicker and more efficiently than other methods.
And as more and more sellers sell their property by auction, some sellers — despite believing in the auction method of marketing — wish to protect their property from selling below what they believe it should.
While there are certainly legitimate ways in which sellers can “protect” their property from selling for less than they desire, one such way is strictly illegal — where the seller bids against other bidders at the auction without proper notice.
First, there are two types of auctions in the United States. These types are known as “with reserve” and “without reserve.” In situations other than forced sales, sellers are only permitted to bid at “with reserve” auctions as “seller bidding” constitutes a reserve.
In a “with reserve” auction, sellers may bid, but only if their right to bid is noted; this is normally interpreted as “announced” to the crowd or otherwise communicated through printed material and/or terms and conditions. Otherwise, if a seller bids without notice, buyers may void sales or take property at the last “good faith” bid.
Given that an auctioneer is conducting a “with reserve” auction and the right for the seller to bid is not noted — and the seller does bid — how does a buyer have knowledge of it in order to exercise his or her rights?
In other words, if the seller (and all those acting in that capacity for the seller) are not identified to all the other bidders, sellers are able to bid without authority in a secret fashion, and thus protect their property without the fear of buyers voiding sales or taking property at the last good faith bid.
Thus, given this disproportionate “playing field” where the seller bids and buyers are left to guess who the sellers are, or might be, suggests to many that auction bidders deserve to know the seller’s identity.
For that matter, even if the seller’s right to bid is noted, should bidders and buyers have the right to know if they are bidding against other interested bidders, or bidding against a seller’s opinion of value?
Further, in “without reserve” auctions, the seller is prohibited from bidding and therefore if a seller does bid, shouldn’t his or her identity be known by other legitimate bidders?
Lastly, even if the seller isn’t bidding, do bidders have a right to know who the seller is? When sellers sell real property, their identity is normally public record. When sellers sell titled vehicles, their identity is normally noted on the title. Yet, other property is commonly sold without any requirement nor effort to identify the seller.
A buyer may well bid more (or less) depending upon the identity of the seller. The seller could be a famous person, or an infamous person, where their identity would be material to bidders. So here, we ask again: Do auction bidders deserve to know the seller’s identity?
Given that many sellers do not wish to have their identity made known to bidders/buyers, what about buyer identities? Do sellers have a right (or deserve) to know who purchases their property? In some jurisdictions, state law mandates that the names of the buyers at auction must be provided to the seller.
Auctioneers join buyers and sellers together by contracts. Contracts require that both parties have a meeting of the minds; can a true contract have a meeting of the minds if one party has no knowledge of who the other party is? It’s occurred at auction for centuries, but does that make it right?
Do auction bidders deserve to know the seller’s identity? We think maybe so.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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