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Writer's pictureMike Brandly, Auctioneer

With reserve auction choices


We wrote about there only being two (2) types of auctions some time ago.

Auctions are distinctly one of two types in the United States: “With reserve,” or “Without reserve.”

If you are considering a “with reserve” auction, you indeed have several choices — however, this is one “type” of auction so the differences are mostly superficial but material.

Find here the basic five (5) versions of “with reserve” auctions:

  1. Published minimum bid

  2. Unpublished minimum bid

  3. Seller confirmation

  4. Seller bidding

  5. Seller withdrawal

Let’s look at each of these with an example:

  1. Published minimum bid

With this version of the “with reserve” auction, a seller may publicize a minimum amount that he (or she) is willing to accept. Most sellers who choose this version contract with the auctioneer that if someone bids at that minimum bid (or more), that they agree to sell their property.

However, even though this is the way these auctions are normally managed, the seller is not obligated to accept a bid at (or in excess) of the published minimum bid, except to avoid a breach of contract with the auctioneer, if this is the prior-arrangement.

For example, Mary hires an auctioneer to sell her 2007 BMW M6 Convertible at auction. Mary wishes to sell her car with a published minimum bid of $35,000 and memorializes this in a contract with the auctioneer.

The assumption by the public will be that if someone bids $35,000 or more, they will be awarded title to this automobile. If the high bid is $38,000 and Mary declines to sell the car, she will be in breach of contract with the auctioneer, but not without that right of rejection intrinsic in a “with reserve” auction.

  1. Unpublished minimum bid

With this version of the “with reserve” auction, a seller may contract with an auctioneer to sell property, and in that contract indicate a minimum amount he is willing to accept. However, in this version, the minimum bid is not publicized or otherwise disclosed to the public. If the bid meets or exceeds this undisclosed minimum bid, the property would normally be sold to the highest bidder.

However, even though this is the way these auctions are normally managed, the seller is not obligated to accept a bid at (or in excess) of the unpublished minimum bid, except to avoid a breach of contract with the auctioneer, if this is the prior-arrangement.

For example, Mary hires an auctioneer to sell her 2007 BMW M6 Convertible at auction. Mary wishes to sell her car for no less than $35,000 and memorializes this in a contract with the auctioneer. Mary and the auctioneer agree not to publicize this amount, or otherwise disclose it to anyone.

The assumption by the public will be that once a high bid is secured, and nobody else bids, and if that high bid amount meets or exceeds the undisclosed minimum bid, they will be awarded title to this automobile. If the high bid is $38,000 and Mary declines to sell the car, she will be in breach of contract with the auctioneer, but not without that right of rejection intrinsic in a “with reserve” auction.

  1. Seller confirmation

With this version of the “with reserve” auction, a seller may contract with an auctioneer to sell property, and in that contract indicate that he reserves the right to accept or reject any or all bids, including the high bid.

In this version, there usually isn’t any certain amount either disclosed nor undisclosed which represents a minimum bid, but instead, the seller can wait until the highest bid is determined and decide if he wishes to sell, or not.

For example, Mary hires an auctioneer to sell her 2007 BMW M6 Convertible at auction. Mary wishes to reserve the right to accept or reject any or all bids, including the high bid. In other words, Mary wants to wait and see what the bidders offer and then she will decide if she wants to sell her automobile.

The assumption by the public will be that once a high bid is secured, and nobody else bids, that the auctioneer and seller will discuss the high bid and then the seller will notify the high bidder forthwith regarding his decision.

  1. Seller bidding

With this version of the “with reserve” auction, a seller may contract with an auctioneer to sell property, and in that contract indicate that he reserves the right to bid at the auction to ensure a certain price is obtained, or the property remains unsold. In this version, the UCC 2-328 dictates that if the seller wishes to bid, that such liberty for bidding must be noticed (for instance, announced to the other bidders) or the buyer gains rights including voiding the sale.

In this version, there usually isn’t any certain amount either disclosed nor undisclosed which represents a minimum bid, but instead, the seller can bid against the other bidders until either he retains title or someone bids at, or in excess of his desired amount.

For example, Mary hires an auctioneer to sell her 2007 BMW M6 Convertible at auction. Mary wishes to reserve the right to bid at the auction. In other words, Mary wants to be able to bid against the other bidders to ensure that she gets what she wants for her automobile.

The assumption by the public will be that Mary will bid up to, but no more than she desires for the automobile. For instance, Mary might be up to $36,000 and then if someone else bids $36,500 and she doesn’t bid anymore, the auctioneer will sell the automobile to the high bidder — someone other than Mary. However, even in this version of the “with reserve” auction, if Mary isn’t the high bidder, she could still decline to sell the car and possibly be in breach of contract with the auctioneer, but not without that right of rejection intrinsic in a “with reserve” auction.

  1. Seller withdrawal

With this version of the “with reserve” auction, a seller may contract with an auctioneer to sell property, and in that contract indicate that he reserves the right to withdraw the property any time up until the auctioneer declares, “Sold!” causing the property would remain unsold.

In this version, there usually isn’t any certain amount either disclosed nor undisclosed which represents a minimum bid, but instead, the seller can just wait to see how the bidding goes and withdraw the property at any time until, but not after, the auctioneer declares, “Sold!”

For example, Mary hires an auctioneer to sell her 2007 BMW M6 Convertible at auction. Mary wishes to reserve the right to withdraw the automobile if she deems the bidding insufficient. In other words, Mary wants to be able see how the bidding goes and withdraw the automobile if the bidding doesn’t reach what she wants.

The assumption by the public will be that Mary will be nearby and signal to the auctioneer if she wants her automobile sold, or not. For instance, the bidding might reach $39,000 and Mary signals to the auctioneer to, “sell the automobile,” or maybe it only reaches $34,000 and Mary signals to the auctioneer to “not sell the automobile.”

Finally, two important points about “with reserve” auctions.1. If the auctioneer declares, “Sold!” the seller is obligated to sell the property, regardless of the version of “with reserve” auction chosen.2. The seller may essentially combine different versions of the “with reserve” auction, such that even if there is a published minimum bid, the seller could also bid against the other bidders, and/or withdraw the property.

Want to have a “with reserve” auction? You have choices.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.

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