Any auction — any time — anywhere — benefits from the “prospect of a deal,” where the bidders sense the chance to “get a deal.” Of course, as a result, more bidders show up, and the high bidder [typically] doesn’t get a deal at all, and the seller benefits.
We wrote about one auctioneer claiming his seller was motivated to sell and ready to sell … but the auction was subject to this seller’s confirmation meaning the seller wasn’t motivated nor ready to sell. https://mikebrandlyauctioneer.wordpress.com/2023/07/14/seller-motivated-ready-but-not-really/.
What’s the issue with “seller confirmation” or selling “subject to …” auctions? There’s little or no “prospect of a deal.” In turn, fewer bidders engage and the seller suffers accordingly. In fact, I was texting my answer to this very question while sipping some coffee in New York City as pictured above.
Of course, there are indeed sellers (and even auctioneers) who aren’t concerned about maximizing price or selling at all. We’ve called these sellers the “maybe sellers” who don’t necessarily want to (or can’t) accept market price as fact — or sell at any price.
Auctioneers who regularly hold “with reserve” auctions conclude their [future] auctions need to be “with reserve” because of the smaller bidder pools when in reality, the “with reserve” auctions are causing the smaller response. https://mikebrandlyauctioneer.wordpress.com/2023/05/17/reserve-auction-needs-reserves/.
If your “subject to” or “seller confirmation” auction was successful, do you ever wonder how much more successful it would have been advertised and conducted “absolute?” How much more would the property have demanded with more bidders?
Or, do think “maybe selling” is a better inducement than “we’re selling regardless of price?” Bidders can’t bid unless they engage, and to get the most bidders to engage, they need the strongest inducement possible.
With reserve auctions have a number of varieties, and “subject to” or “seller confirmation” is the worst of those choices in that it provides the least disclosure — hiding what the seller is willing to accept and therefore presenting virtually no sense of a “prospect of a deal.”
Two Nobel Prize-winning economists noted that bidders respond with more disclosure, and such benefits the seller. https://mikebrandlyauctioneer.wordpress.com/2020/10/16/providing-as-much-information-as-possible/. Too, many auctioneers know absolute auctions work better: https://mikebrandlyauctioneer.wordpress.com/2016/08/25/the-power-of-the-word-absolute/.
As a new auctioneer, be very careful where you secure your advice concerning this matter. If an auctioneer is telling you “with reserve” (seller confirmation) auctions are best, see if he or she has held any absolute auctions. If an auctioneer is telling you “absolute” auctions are best, see if he or she has held any with reserve 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 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 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.
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