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  • Writer's pictureMike Brandly, Auctioneer

Disclosing what you should know

This is an “Iron Clad” 4 Quart Watering Can. Best I can tell it’s in good shape and likely is able to water plants, flowers, grass, weeds … whatever you want to water. Let’s say you as an auctioneer are selling this 4 Quart Watering Can at auction — “as-is” and “where-is” and there are no obvious issues with this can holding nor dispensing water.

Yet, you turn it over and notice a small hole (somewhat hidden, not easily discoverable) on the bottom. I have held that such should be disclosed to potential bidders. The hole isn’t something obvious (patent) and rather not-so-obvious (latent.)

On a similar note, anything patent (obvious) wouldn’t need to be disclosed to bidders if they are afforded an opportunity to personally inspect the subject property. However, if that opportunity is denied, even some otherwise patent issues could be unrevealed to bidders.

Of course, what’re the total potential damages of such non-disclosure? What do these old watering cans sell for? Maybe $25? What would be the potential damages if you are selling a $100,000 car with no brakes? Back to our “Iron Clad” 4 Quart Watering Can. Are auctioneers required to send this can out to a metallurgy expert for examination to test for stress fractures? Auctioneers are not, as checking for a hole is reasonable, and sending out for a metal test is not reasonable.

I’ve suggested that auctioneers disclosing only what they know is untenable. Why is that? Because then ever auctioneer could (would) just say they didn’t know anything. What does common sense say the standard must be? Auctioneers should disclose what they should know.

What an auctioneer should know depends on several factors — the extent of concealed issues, the material nature of the issues, the expertise of the auctioneer, the potential damages, and what’s reasonable. We’ve suggested the general phrase “all known material facts” but there’s much more to that analysis.

Upon any further inquiry, I have never expressed to anyone any time in my career that auctioneers must disclose all latent issues regardless of the overall reasonableness test. For that matter, I just wrote about the word, “reasonable” here:

I have argued otherwise that depending upon what’s reasonable, auctioneers should disclose latent material facts about property they are contracted to sell at auction, particularly when such facts constitute safety or health issues, or substantially affect value.

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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