Many real property auctioneers have “seller confirmation” auctions, allowing the seller to accept or reject the highest bid at the auction.
Some consider this the worst type of auction, as there is little or no disclosure and it lacks the essential ingredient for auctions to work … the “prospect of a deal” … thus not attracting bidders like other auction formats.
Today, we ask if seller confirmation auctions are different (or are they different?) from traditional listings of real property?
Auctions are competitive, typically pushing the price upward for the seller.
Listings are somewhat competitive, especially with high-demand properties, pushing the price upward for the seller.
At auction, the highest bid is only one bid higher than the second-highest bid.
A traditional listing often receives the highest (best) offer, regardless of other offers.
Auctions with “seller confirmation” allow the seller to accept or reject the highest bid.
Traditional listings allow the seller to accept or reject any price.
At auction, the seller can dictate the terms of the deal.
A traditional listing allows the seller to accept or reject any terms.
Auctions set a deadline where bidders have to bid by a certain date/time indicating time is of the essence.
Traditional listings can incorporate a “highest and best” by a certain date/time and otherwise could sell at “any time” indicating time is of the essence.
Auctions of this type often require the seller to pay non-refundable marketing fees up-front.
Traditional listings rarely require the seller to pay for any of the marketing.
If the “seller confirmation” sale is unsuccessful, that fact is publicized including the highest bid (offer.)
If a traditional listing remains unsold, it is known the property hasn’t sold, but all particular offers remain largely confidential.
As one might review this list, I wonder if a traditional listing is better for the seller/client than this “seller confirmation” auction? They are indeed similar, but I think the listing comes out on top for the seller and auctioneer/broker.
I’m not suggesting there are no successful seller confirmation auctions. What I am suggesting is a traditional listing may be just as good or better than a seller confirmation auction most of the time.
Interestingly, many auctioneers criticize any and all traditional listings, touting auction marketing and then conduct a seller confirmation auction that is likely about the same, or possibly worse.
A far better option than a traditional real property listing is an absolute auction or an auction with a reasonable published (academic) minimum bid. With a large, motivated bidder pool competing for your property knowing it will sell (and not just that it maybe will sell,) sellers benefit.
We noted prior that in the case of John C. Sullivan v. Max Spann Real Estate & Auction Co. (A-57-20) (085225), the court suggested that traditional real estate transactions were very similar to “with reserve” auctions: https://mikebrandlyauctioneer.wordpress.com/2022/08/04/sullivan-v-max-spann/.
Importantly, auctions often utilize a buyer’s premium (possibly in place of so-called seller commissions.) We wrote about the impact of such commission structures here: https://mikebrandlyauctioneer.wordpress.com/2011/04/02/the-net-effect-of-the-buyers-premium/.
Auctioneers conducting “seller confirmation” auctions should talk with those sellers/clients prior and discuss that a traditional listing may be a better solution. We auctioneers owe our clients good counsel and not to necessarily say that any type of auction is always the best solution.
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 formerly at 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 Auction 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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