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  • Writer's pictureMike Brandly, Auctioneer

Start the auction or commence private treaty?

An absolute auction is — by definition — “The genuine intent to transfer to the highest bidder regardless of price.” We wrote as much here:

So let’s say an absolute auction (of one property) is scheduled and only one bidder shows up; does the auctioneer open the auction? Probably not, despite the seller/auctioneer having the genuine intent to do so prior.

What if only two bidders show up? Three? Four? Our question today is, what number of bidders give the auctioneer reasonable assurance continuing the auction is prudent, rather than withdraw the property, and tell the bidders the seller will be entertaining private treaty offers?

While having a predetermined number ahead of time, such as, “We’re only going to start the auction if we have …” would be counter to our genuine intent premise, auctioneers and sellers can otherwise gauge if sufficient bidders are present.

We previously wrote about Dr. Alfred Lindsey and Prof. Bentley Garrett as the most interested (alpha) and the second-most interested (beta) bidders for a particular item.

That analysis is here where an auctioneer/seller has alpha and beta, with no other bidders necessary.

The formula we developed for determining the odds of alpha and beta being present is: X = [[[(2*B)/(B+1)]-1]*min{B,1}]^2 where B is the number of bidders and X is the chances of having alpha and beta.

As can be seen, once B > 5 (6 or more) the odds of having alpha and beta exceeds 50%. In other words, if six or more bidders are present for one lot — one property — there’s a greater chance alpha and beta are present than they are not.

However, as we previously alluded — if you have a number of necessary bidders printed or noted anywhere constituting the minimum needed to open the auction, you are not selling absolute. If, on the other hand, you determine you have an insufficient number of bidders present, we would hold you could cancel and proceed otherwise.

Lastly, it is dangerous for any auctioneer to withdraw an item from an absolute auction with a material (or more) number of bidders — as this clearly denotes the lack of the “genuine intent to transfer to the highest bidder regardless of price.”

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 The Supreme Court of Ohio for attorney education.

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