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  • Writer's pictureMike Brandly, Auctioneer

Auctions: Fast, Fun & and … what?

We wrote a few years ago that many consider auctions to be “fast, fun & transparent.” We noted the commonly used definitions in this treatise:

We agree, that auctions can be fast, fun & transparent, but not all auctions are such. Some auctions (auctioneers) are “sort of” fast, maybe fun, and not so much transparent.

Regarding these exceptions, some online auctions are up for bidding for more than 10 days … some auctioneers take “all day” to sell 300 lots, and the lack of transparency can make the event even less enjoyable.

Auctioneers have said auctions are transparent: “Everyone is on a level playing field.” We’ve noted bidders participating on a level playing field (equal footing) is important:

Yet, despite many auctioneers providing for a level playing field (treating bidders the same) it’s not transparent at all to keep the reserve the seller desires secret or conduct “seller confirmation” auctions. This is the opposite of transparency.

What do some auctioneers do instead of being completely transparent? They keep secrets, and bidders do not like secrets and auctioneers can do better:

This isn’t just our idea, but many auctioneers agree. Additionally, two Nobel Prize winners (2020) namely Paul R. Milgrom Ph.D. and Robert B. Wilson DrBA concluded that with more disclosure (less secrets) auction bidders bid more.

The default auction in the United States is “with reserve” except for Louisiana, where the default is “without reserve.” A seller confirmation or secret reserve auction is a version of a “with reserve” auction. Despite this, you can have a without reserve (absolute) auction anywhere, and you can disclose the least the seller will accept (with reserve.)

There are not three (nor four, nor five) “types” of auctions. There are two types of auctions, and “with reserve” auctions can have various versions:

What are the [somewhat] obvious implications of absolute or disclosed (academic, acceptable) minimum bids? More bidders participate and bidders better engage, thus benefitting the seller. You don’t have to take my word for it:

As we previously noted, some auctioneers say that all auctions should be “with reserve” to protect from a smaller than desired bidder pool. What these auctioneers don’t seem to grasp is a “with reserve” auction causes a smaller bidder pool.

Want more bidders? Want higher prices? Have an absolute (without reserve) auction or a “with reserve” auction with a modest acceptable bid. Or keep having secret reserve or seller confirmation auctions and have fewer bidders and likely lower prices — of course further convincing you your next auction needs to allow for a secret reserve and/or “seller confirmation.”

Is every seller suitable for an absolute or academic published minimum bid auction? Is every auctioneer appropriate? Absolutely not as sellers have to have the right circumstances, and auctioneers have to market appropriately and believe auctions produce market value and property is only worth what someone’s willing to pay for it.

Do you believe it? Many auctioneers do, but some of you auctioneers clearly don’t — and/or don’t know how to market sufficiently or properly: Therefore if your seller can’t, or you don’t believe, have secret reserve and/or seller confirmation 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 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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