Our question today is: “Would an auctioneer accept a seller’s property for auction and sell it absolute if the seller requested such?” We ask this because some auctioneers imply selling absolute is ill-advised and/or they wouldn’t accept property for absolute auction.
We’ve defined (and testified in court) that selling absolute is the “genuine intent to transfer to the highest bidder regardless of price.” Sellers (and their auctioneers) have another choice which is to sell “with reserve” and then maybe sell to the highest bidder, but maybe not.
It would seem an anti-absolute auctioneer confronted with an absolute seller would have two choices, as this would constitute a “legal direction:”
Take the property for absolute auction
Refuse the engagement
If an auctioneer refused the engagement, he could then offer or suggest this absolute seller sell with reserve instead. Yet, if the seller insisted, the auctioneer would have no choice but to decline. Of course, it’s likely an absolute seller could eventually find an auctioneer to sell his property absolute.
One of the duties of an agent (auctioneer) is to give good advice to the client. Is selling absolute always a good idea? No. Is selling “with reserve” always a good idea? No. Are there some ways of selling with reserve which are better than others? Definitely.
Another agency duty of an auctioneer is loyalty. Auctioneers are to act for the benefit of their clients, over their own benefit. If an absolute seller would benefit from an absolute auction, it would be a violation of an auctioneer’s fiduciary duties to recommend anything else.
Further, if a seller is undecided if absolute or with reserve is the better choice, it would be the duty of the auctioneer to recommend the correct solution. There are circumstances where an absolute auction is the better solution, and there are circumstances better served by a “with reserve” auction. We’ve recommended both over our many years as an auctioneer, depending upon the situation.
For any anti-absolute auctioneers reading this, you should know that many auctioneers sell all kinds of property absolute to the highest bidder, and report record prices and happy clients. Certainly, not every seller is suitable for this format, but to never sell anything absolute is misguided.
As we’ve repeatedly held — no auctioneer can control or set the price, and rather can only endeavor to maximize the bidder pool and attract the right bidders. What feature of any auction lures bidders? The “prospect of a deal.” Which type of auction has the most “prospect of a deal?” An absolute auction.
Sometimes auctioneers haven’t put themselves in their bidders’/buyers’ “shoes” and looked at what type of auction format would most attract them. We explored that concept here and invite you to read: https://mikebrandlyauctioneer.wordpress.com/2018/03/12/what-drives-bidders-to-an-auction/.
Of course, sufficient marketing is paramount. For example, we held an absolute auction in October 2021, where we had a big sign at the property, drone video, Facebook ads, a full-color postcard mailer, and other Internet presence. The highest “real estate agent estimate” was $290,000 and our absolute auction produced $471,800 — with much more favorable terms for the seller — just 30 days later.
Yes, the aforementioned is just one example, but I have many other examples, and thousands of other auctioneers do as well. Selling absolute is an auctioneer’s duty if the seller has urgency, equity, reasonable expectations, and desires the property to be sold absolute.
Again, it is indeed an auctioneer’s fiduciary duty to advocate for their seller. Avoiding disaster is one such objective, but truly obtaining the highest possible price is typically another; we have both duties, keeping in mind not every seller is suitable for an absolute auction, and not every seller is suitable for any auction.
Relatedly we wrote about such anomalist auctioneers who endeavor to avoid perceived peril at all costs including receiving less than market value: https://mikebrandlyauctioneer.wordpress.com/2021/06/07/anomalist-auctioneers/. In fact, the “protection” of a reserve auction may indeed protect your seller from the highest price.
It is very important in order to harness the power of an absolute auction and stay out of a breach of agency duty claim, to advertise it as such. Any absolute auction should be clearly and prominently marketed as “absolute” https://mikebrandlyauctioneer.wordpress.com/2019/02/22/is-your-absolute-auction-being-advertised-conducted-as-such/.
If you feel as if you’ve read this treatise before, you haven’t, but I did write about this general concept from a slightly different point of view in October 2021: https://mikebrandlyauctioneer.wordpress.com/2021/10/13/you-dont-conduct-absolute-auctions/.
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.
Comments