Recently, an auctioneer held a multi-parcel real estate auction.
In the terms and conditions prior to the start of the auction, the auctioneer noted that bids would have to be at least 10% more than any previous bid in order to be accepted.
In other words, there would be minimum bidding increments.
Auctioneers requiring certain bid increments is not uncommon; in a future post we’ll look at bid increments in particular. Our point of this article is not to isolate that particular term for discussion, and rather note here:
Most all auctions have advertised terms and conditions
Terms and conditions can be changed day-of-auction
When terms and conditions are changed, auctioneers are asking for problems
In the auction we’re referencing here, the auctioneer changed the bid increments to less than 10% the day of the auction. In fact, the terms and conditions noted otherwise that the auctioneer reserved the right to lower the minimum bid increments “if the numbers got real high … or if the bidding was lackluster …”
Why would terms and conditions be written this way?
We recently posted more on this subject of changing the terms and conditions here: The auctioneer’s opening remarks
Let’s look at a few examples of changing the terms and conditions:
Auctioneer changes the start time of the auction due to a street closure nearby
Auctioneer changes deposit requirements after the only local bank in town is seized by the FDIC
Auctioneer changes the bid increments if the numbers get real high
Which one stands out to you? While we submit that changing the terms and conditions day-of-auction is asking for a problem, the problem has to be weighed against the potential gain by changing the term and/or condition.
Where auctioneers are asking for even more problems is when the “contingency” in the term and/or condition is subjective, rather than objective. In our example here, “if the numbers get real high?”
In our actual auction here, a bidder had the bid at about $576,000 and the auctioneer took a higher bid that was less than 10% more than $576,000 (less than $633,600). The bidder at $576,000 cried fowl, citing the terms and conditions stating a 10% minimum raise. Yet, the auctioneer cited his right to change them, “since the numbers got real high.”
What do you think the argument in court will be about? If this property had been appraised for $3 Million, is $576,000 “real high?” What is “real high?” Who’s to say what “real high” is?
Changing auction terms is asking for a problem.
If it has to be done, auctioneers are advised to do it for a good reason, and do it based upon something objective and/or concrete. Basing such a change on something subjective, or with the benefit of the change less than the cost of changing it, puts both the auctioneer and seller is a less than desirable situation.
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 is Executive Director of The Ohio Auction School.
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