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  • Writer's pictureMike Brandly, Auctioneer

Why is the default “with reserve?”

In 49 of our 50 states, an auction by default is “with reserve.” We attempt to answer why that is … and it’s unclear. The laws just prior to the UCC § 2-328 (the Uniform Sales Act) implied a default, but not until more recently did the Uniform Commercial Code expressly specify the default.

Nonetheless, some auctioneers will say that the law is written to protect sellers. Yet, what is the law also protecting sellers from? Possibly larger crowds, and higher prices. Other auctioneers argue sellers committing to sell to the high bidder, versus maybe selling to the high bidder … attract more bidders.

Relatedly if I buy a lottery ticket and my numbers are drawn, I appreciate that I will be awarded the prize, versus just maybe being awarded the prize. Virtually no other purchasing experience involves “maybe” and it appears more and more people are aware of this difference.

Louisiana’s default auction is “without reserve” so they don’t want to protect sellers there? Does it really matter what the default is then? Auctioneers and sellers can decide which they feel is best, right? Auctioneers in fact owe their clients their wise counsel.

Yet, there are auctioneers who say “with reserve” is always better. Yet, we have a few questions for you:

  1. Why do so many auctioneers say an auction is “absolute” when it’s actually a “with reserve” auction?

  2. Where are all these absolute auctions advertised rather as “with reserve” to entice bidders?

  3. Why is “This is a with reserve auction” never plastered in large print at the top of the handbill?

Maybe these aforementioned auctioneers know deep down inside that without reserve (absolute) auctions draw bigger crowds, more interested committed bidders, and higher prices, but can’t move past the perceived risk that “something could happen?”

Something indeed could happen. There could be a large crowd, heightened interest, and aggressive bidding, or maybe nobody shows up. However, the odds of nobody showing up or another sort of disaster are remote. And, one can cancel an absolute auction before it commences.

What’s the default auction? The better question might be, “What is your auction type and why?” And in Louisiana, if you don’t specify otherwise, it’s all “selling to the highest bidder …” (explicitly) which as I understand it is meant to protect sellers since it’s state law there?

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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