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  • Writer's pictureMike Brandly, Auctioneer

Is “highest and best” selling by auction?

In very high demand, low inventory real property markets (seller markets) often listing brokers will note that they will entertain (and/or agree to accept) the “highest and best” offer by a certain date and time. For instance, “We’re taking offers until 12:00 Noon Tuesday and encourage you to make your highest and best offer by then.”

Some auctioneers view this type of marketing as analogous to conducting an auction, which in some jurisdictions requires a separate state-issued license. We hope to answer this question today … “Is ‘highest and best’ selling by auction?” We think probably not.

Most states define an auction as more-or-less the selling by competitive bid, where an auctioneer accepts bids and then asks for more, selling to the highest bidder. It would seem from this, that a broker would have to review each “highest and best” offer, and then notice each offeror encouraging them to outbid the current highest (and best) bid to be considered conducting an auction.

Further, some states dictate that an auction is the “open outcry” by an auctioneer offering the property to the highest bidder with a start time and then either an end time or soft close. These broker’s activities are not often (if ever) open outcry and usually lack a firm starting time, and rather more like a sealed bid process which is almost entirely unregulated by any state auction license law.

For auctioneers thinking that states should require brokers to become licensed auctioneers to hold property selling to the highest and best offer by … whenever — they should note that there is a considerable effort across the United States to eliminate many occupational licenses rather than create more.

We’ve written numerous times about this trend (for better or worse) to eliminate occupational licensing and even auctioneer licensing, including most recently here: https://mikebrandlyauctioneer.wordpress.com/2020/12/21/the-white-house-and-occupational-licensing/. In fact, most auctioneers appear to be generally in favor of less government regulation, rather than more or even the status quo.

Auctioneers are regulated by state license law in roughly one-half of the United States. It seems unlikely any type of lawsuit or federal mandate would result in forcing states to revise their license law. Along with that, it would be extremely likely that the real estate trade association would oppose any such licensing requirement.

Auctioneers have a better system than the traditional brokering of real property. Auctioneers can dictate the date and time of sale, as well as the terms, and sell to the highest bidder — often producing a better net-to-seller than any other methods of sale. Many auctioneers work in partnership with real estate practitioners to sell real property at a true auction.

Lastly, auctioneers desiring to sell real property at auction typically need (and have) a [an additional] “real estate” license — or in states where that’s not required, they certainly should have that license in order to provide a complete service coupled with the education required to do so.

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 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 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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