Bidders have a right to assume whatever they are buying at auction has clear title. What do we mean by that? That the subject property is free and clear of any liens and encumbrances.
If a buyer buys a farm or any other real property at auction, he would rightly expect — unless told otherwise — that all liens would be brought-up current (paid) through the day of transfer.
Of course, in our example of this farm, the buyer would also be expected to know that some liens remain attached such as real estate taxes, but that his obligation to pay would only begin for the time he owns the property.
Some items sell at auction without clear title — a real property transfer might be “subject to” a prior lien and/or encumbrance. A vehicle could be sold with a salvage or rebuilt title However, in cases such as this that status would necessarily need to be disclosed to all potential buyers.
An auctioneer might say, “But I’m selling ‘as-is’ and ‘where-is'” and “I don’t have any responsibility to disclose anything …” but that doesn’t relieve any auctioneer/seller from disclosing material latent issues such as anything less than clear title.
Incidentally, latent isn’t completely hidden, and rather something that can’t be discovered by a bidder/buyer even with a reasonably diligent inspection. Too, only material issues really matter and of course, something completely hidden couldn’t be disclosed.
More generally, “title” is by far the most important issue with any property transfer — the one issue that effects value more than any other. Auctioneers and sellers have a duty to property assess and disclose any title issues to bidders/buyers prior to the auction commencing.
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, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is 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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