I. MAIN TOPICS
A. AUCTION DEFINITIONS
Absentee Bid – If you cannot be present on the date of the auction, you can submit an absentee bid to the auction
company, who will take it as an official bid to purchase. If no one present at the auction bids higher than you, you win
the property.
Absolute Auction – At this type of auction, there is no limitation or minimum price the property must reach before
selling. The highest bidder wins the auction, end of story.
American Auction – At this type of auction, multiple items are bid on at the same time, and the winner is the person
who bids the most amount of money for the greatest quantity of items.
Appraisal – An assessment of value or possible sales price of an item or piece of property. The person performing this
assessment is called an appraiser.
As Is – This means the property is being sold without any warranties or guarantees as to the condition and/or the
suitability for a particular purpose. Property owners are still required to warn you of any known defects in the property
and its systems, but buyers may not make any contingencies for repairs or discounts, nor may they hold the sellers
responsible for damage discovered after the sale. This is why it is very wise to have a licensed Home Inspector see the
property before committing to purchase at an auction (or any type of real property sale for that matter).
Auction – A method of selling real estate in a public forum through open and competitive bidding.
Auctioneer – The person who presides over the auction and handles the bidding during a sale.
Auction House – The company which the auctioneer represents or works under. In real estate, the auction house has a
contract with the owner of the property that allows them to dispose of the property via public auction to the highest
bidder.
Auction Price – The price of a particular property as determined though the marketing efforts of an auction.
Auction Value – The price a particular property brings in open competitive bidding via public auction.
Bid – A registered auction attendee’s indication of intent to buy by either agreeing to the bid increment being called
by the auctioneer, or by verbally offering a price to pay for the item. In an absolute auction, the person with the
highest bid wins the auction.
Bid Caller – The person at the auction who actually calls out the stages of the bidding. This is usually the auctioneer,
and he/she will recognize competing bidders and acknowledges the winner when the gavel falls.
Bidder Number – The registration number issued to each bidder who registers on the day of the auction.
Bidder Package – A collection of printed information, instructions, and terms of the auction sale handed out to
potential buyers of the property. If personal property is being sold in conjunction with real property, this packet will
often include a list of lot numbers or an auction catalogue to help bidders follow along.
Broker Participation – An arrangement for third-party real estat agents or brokers to register potential bidders for
properties being sold at auction for a commission.
Buyer’s Premium – An advertised percentage of the high bid, or a flat fee which is sometimes added to the high bid to
determine the total contract price to be paid by the buyer. This is often seen in auctions where no broker participation
is taking place, but can be required at any auction. Check with the auction company prior to the sale date to
determine if you will be required to pay a Buyer Premium if you win the auction.
Carrying Costs – The costs involved in holding a property prior to sale, such as insurance, mortgage payments, taxes,
and maintenance costs. Selling at auction benefits property owners with high carrying costs, because of the quick
turnaround and fast closing dates.
Catalogue Auctions – At this type of auction, bidders would have viewed the items being sold prior to the auction
taking place. The items being sold are usually at a different location than where the auction itself is being held.
Conditions Of Sale – The legal terms that govern the conduct of an auction, including acceptable methods of
payment, terms, buyer’s premiums, possession, reserves, and any other limiting factors of an auction.
Due Diligence – The process of gathering information about the condition and legal status of assets to be sold.
Dutch Auction – At this type of auction, multiple quantities of the same item are put up for sale, and it results in multiple
winners. Those who win all pay the lowest of the winning bids per item or per lot.
Gavel – The hammer-like object the auctioneer uses to officially close the bidding by hitting on his/her podium or table.
Hammer Price – The last bid increment before the auctioneer drops his/her gavel. It is the price the winning bidder
pays for the property or item. Some auctioneers will call “Hammer Up!” just before dropping the gavel to entice any
desperate last-second bidders to cry a higher bid.
Minimum Bid Auction – A type of auction in which the seller has pre-determined a minimum sale price that the bidding
must reach before he/she will transfer ownership of the property. As long as the bidding exceeds the Minimum Bid, the
property will change hands. If the auction bidding does not exceed it, then there is a “No Sale,” and the owner keeps
the property. This is unlike an Absolute Auction in which the highest bidder gets the property regardless of the owner’s
happiness with the final bid amount. See also: Reserve Auction.
No Sale – When a Reserve or Minimum Bid auction does not meet the minimum requirements pre-set by the seller, the
auction results in a “No Sale,” and the highest bidder does not win the right to buy the property.
Opening Bid – The first bid offered by a bidder at an auction. Many times the auctioneer will propose an
opening bid, but this is usually much higher than what the bidding actually starts out at. When attending an
auction as a potential buyer, it is acceptable to call out the first opening bid, even if it is lower than the
amount being sought by the Bid Caller. As bidding continues, the Auctioneer or Bid Caller will return to you
whenever someone else bids above you until you make a definitive gesture that tells them you are done
bidding. Some real estate auctions require pre-registration before the sale date, at which time you may be
asked to state your Opening Bid in writing to prove your seriousness about being a competitive auction
attendant, but it is not binding should you decide not to attend or not to bid at all.
On Site Auctions – These are auctions that take place where the items being sold are already located, due to
impracticalities of transporting the goods to the auction house. Real property auctions will many times be followed by
on-site personal property auctions, and winning bidders take the items won with them when they leave the site.
Online Catalougue – A detailed list of items being sold, and the terms of the auction sale, which are posted on the
internet.
Preview – A specified date, or list of dates, and times the property is available for prospective buyers to view and
inspect the property. This could be in the form of an Open House for a several hours a few weekends before, or just to
a several hour window prior to auction time on the day of the sale. Either way, traditional “showings” are not always
allowed, so be sure to check the preview terms and make those dates available, as it may be your only opportunity to
see the property up close other than on auction day.
Private Auction – At this type of auction, the bidders’ identities are not known.
Proxy Bidding – A system of bidding that allows an absentee bidder to stay in the race for the high bid, but still allowing
him/her to get the best possible price. Proxy bidding ceases when the absentee’s maximum bid has been reached. It
is essentially the auction company increasing the absentee’s bid by the going bid increment up to the maximum bid.
If the absentee’s maximum bid on an item is $100 for example, but the highest price any of the other bidders in
attendance will pay is $75 and the bids have been going up in increments of $10, then the absentee bidder would win
the item for $85.
Reserve Auction – A type of auction in which the owner of the property reserves the right to establish a reserve price
(as in a Minimum Bid Auction), to accept or decline any and all bids, or to withdraw the property at any time prior to
the announcement of the completion of the sale by the auctioneer. Many times the term “Minimum Bid Auction” is
used interchangeably with the term “Reserve Auction.”
Sealed Bid – Instead of an auction company taking live bids from multiple parties who are competing against visible
parties and known bid amounts, an auctioneer can accept sealed bids, which are confidential. The bids are then
opened at a pre-determined time, and the highest bidder wins the auction.
Sold – Called out by the auctioneer once the Hammer Price has been reached and a winning bidder has been
acknowledged.
Yankee Auction – In this type of auction, a seller has offered multiple quantities of the same item for sale, and it results
in multiple winners, who each pay their own exact high bid.
B. FREQUENTLY ASKED QUESTIONS
1. Is auction experience required or preferred to bid at an auction?
No. While it does help to be somewhat familiar with the auction process, it is not necessary to have prior
experience. You have to start somewhere! If you do have time prior to the auction you are planning to attend, it might be fun for
you to go to some other auctions just to watch and ask questions. If there is no time for that or there are no other auctions
scheduled before yours, a good source of information is the auctioneer him/herself. They understand that some attendants will be
new, and they expect and encourage you to contact them ahead of time with questions!
2. Won’t an auctioneer be able to take advantage of my lack of experience on sale day?
No. It does not benefit the auctioneer in any way to have a property sell to any particular individual and the auction
process itself does not really lend itself to that sort of thing. The nice thing about buying at auction is it is a very honest forum.
Everyone knows who they are competing against, and at what price. The auctioneer’s position in the sale is simply to take bids
from all willing and able parties until a final price is met. One person calls a bid, another person increases it, a third may increase
over that, and when the auctioneer looks back to you to see if you want to bid again, you have the sole responsibility of choosing
whether or not you wish to continue. If you win the bid, you win the auction. Plus, all terms are given to you ahead of time so
there are no surprises.
3. Do I need to register to bid at an auction, or can I just show up and throw my hand up when I feel so inclined?
Yes you need to register to bid at auction, and no you cannot just jump into a sale that is already in-progress. Most
auctions will request that you pre-register before the day of the sale. This gives the auctioneer an idea of expected turnout, and
for you it means just one less thing you have to worry about on the day of the auction. If you are attending an auction of an
AuctionTracs member, you have the option of pre-registering online through our Registration Portal. You can also contact the
auctioneer directly and they will probably mail, fax, or email you a form to fill out. Your bidding card will either be sent to you in the
mail, or you may just have to pick it up from the auction officials on the day of. Your bidding card is what tells the auctioneer you
are registered and are eligible to bid during the sale.
4. What kind of properties can be purchased at auction?
Just about everything can be bought and sold at auction! Livestock, automobiles, watercraft, technological equipment,
furniture, antiques, office goods, jewelry, clothing, artwork, novelties, seized storage units, and of course real estate. The list
could go on, but you get the idea. AuctionTracs focuses primarily on real estate auctions (also known as real property auctions),
and personal property being sold off the estate. In the areas of real estate auctions, you can purchase your next home, invest in a
distressed property for fixing up and flipping, buy a multiple-family home that you rent out, acquire a new business space for your
growing company, purchase land - both residential and commercial, and so on. Real estate auctions will sometimes be properties
that have been foreclosed on by a bank, or that the local government is disposing of to cover unpaid taxes and liens.
5. Who owns the properties being sold?
That really just depends on the property but here are some common scenarios. Sometimes it is being sold by the current
owner who is just looking for a quick way to sell his/her property or otherwise doesn’t want to fool with the drawn out process of
selling in the conventional way. Sometimes the owner has passed on and the property is in probate, and the estate is selling the
property at auction either to divide the profits between the heirs or to cover liens backed by the property. Sometimes the property
has been foreclosed on, so the bank is selling the property at auction to minimize holding costs. Sometimes the local government
has seized a property either for illegal activity, or simply for unpaid taxes, so they will dispose of it via public auction. Finally, there
are some auction companies that own real estate themselves, and they are selling the property.
6. What sort of guarantee will I be given if I purchase a piece of real estate at auction?
Typically, no warranties, guarantees, or promises of any kind regarding the condition of the property will be given. The
term you will hear most often regarding real property auctions is that they are sold “As Is, Where Is.” The benefit for someone
selling their property at auction, is that they are not required to furnish any allowances, repairs, credits, refunds, and the like, to a
buyer before closing or after the sale. It makes for a quick process with a “no strings attached” kind of outlook. For the buyer, it
means being very thorough with research and inspections to ensure you don‘t get stuck with a property you either don‘t want to
live in, can‘t afford to bring up to standard, or can‘t resell without losing money. The property may or may not have a clear title, a
fact which will be revealed to you prior to the sale. This is something that will play into your decision whether or not to purchase
the property. It is extremely wise to enlist the service of various real estate professionals who are trained and licensed in various
areas of real estate.
7. Who can I call on to get help when considering purchasing a piece of real estate at public auction?
A Buyer’s Agent is a valuable person who can do everything from pull comparable sales in the area so you don’t overpay
for a property, help you with pre-registration, assist in your financing arrangements, and refer you to other professionals as you go
along. If you will be financing the property, you will want to check with the auctioneer to see if that has already been arranged.
Sometimes auctioneers will have relationships with local banks, who will offer Non-Qualifying Terms. If you have an established
relationship with another lending source, however, the loan officer can be a great source of information as well. One of your
primary concerns, of course, will be the condition of the property. Since you will be granted no disclosures, warranties,
allowances, or refunds, it is important to seek the services of a licensed Home Inspector. His/Her fee is a small price to pay to
ensure you are spending your money wisely. In older homes, you may want to have a Lead Based Paint inspection done. Other
investigations would be to check for pest and rodent infestations, radon gas, mold/mildew problems, and the like. If you are using
the service of a Buyer’s Agent, they can help you arrange all of these inspections prior to sale date.
8. Should I inspect the property prior to purchasing it?
Yes! Not only will you want to be sure there are no structural or system problems, but you should see if the property suits
your needs in terms of location, size, functionality, and other important aspects. Remember, if you win the auction, the property is
yours and there will be no turning back. So definitely inspect the property prior to purchase. If you are unable to see the property
beforehand and/or have not had it inspected by a certified Home Inspector, then it is advisable not to bid on the property.
9. Will I be required to pay anything up front for the property if I win?
Yes. There is no fee to attend or bid at the auction, but if you win, you will be required to put some amount of money
down. Sometimes the down payment is a percentage of the purchase price, sometimes it is a flat, pre-determined amount.
Whatever this amount, be sure to find out what it is ahead of time and to have your proceeds available on the day of the sale.
10. Do I need to qualify for financing prior to the auction?
That depends. Sometimes a lender will have pre-set terms that many times are non-qualifying. What this means is that if
you win the bid and you have the required down payment, you get the financing terms irregardless of your other credit history.
Most of the time, an auction will stipulate a down payment to be paid when you win, with the balance due at closing (in
approximately 30 days). How you choose to furnish the down payment and balance at closing is up to you. If you are going to
finance these amounts, then yes you will most definitely want to attend to all that ahead of time. Remember, if you win the
auction, you must pay for it. To not have your financing set ahead of time is a risky situation unless you have the cash on hand to
cover it if the financing falls through.
11. I’ve heard that people who auction off their property are in usually in trouble and are desperate to sell.Does this mean I can
expect to pay below market value for auctioned properties?
Not necessarily. While yes, some properties that are being auctioned will be in some type of distress, nowadays
auctioning real estate is becoming as common as selling through more traditional means. Many times it is being auctioned simply
because the seller just doesn’t want to fool with all the time and hassle that can go into traditional listing techniques. Auctions
provide the seller a definite sale date, maximum exposure for marketing dollars, and a quick and stress-free closing lacking the
uncertainty of multiple contingencies, financing fall-through, and inspections. Because an auction brings all serious, willing, ready,
and able buyers to a point of decision, the seller can be sure that his/her property will sell for market value. Remember that a
property is really only worth what someone is willing to pay for it, and while a smart buyer will try to get a property for as little as
possible, they will be well versed in the conditions of the area and will be fully expecting to pay at price comparable to other sales
in the area. To expect to get a great deal on an otherwise desirable property is probably only setting yourself up for
disappointment. While it does happen, you shouldn’t base your decision to buy at auction solely on that fact.
C. WHAT HAPPENS ON AUCTION DAY?
1. Arrive EARLY! It may be that you have not been allowed into the property until the day of the auction. If this is the case, you
will need to have any professional inspectors arrive early with you to thoroughly go through the property. While the inspector(s)
are attending to the property’s structural and technical elements, you can be assessing its functional elements in the meantime.
Only you will know if the property truly suits your needs. Make sure key decision makers are with you!
2. Register with the auction team if you did not already do so. You will be given a bidding number, which will be printed onto a bid
card. It will be this card you hold up to indicate to the auctioneer that you would like to bid, and your bidding number is what will
be used to identify you so there is no confusion as to who has the current high bid. At some auctions, a returnable deposit may be
required up front. If you don’t bid on anything, you get your money back. You will be given literature about the property, the terms
of the sale if you should win, any deposits required, any financing that is being provided and by whom, as well as any disclosures
pertinent to the sale. For auctions including personal property, you will be given a list identifying the items to be sold by their lot
number. This is called the catalog.
3. If you are interested in any personal property to be auctioned after the sale of the real property, now is the time to inspect it and
to make notes on your catalog so you don’t forget to bid.Sometimes a lot number will be called, but the item will not be brought to
the block either because it is too big or simply to keep things moving along more quickly. At some auctions you are allowed to
move about during the bidding, and will be able to take a second look at an item in the middle of the call. Other auctions you may
be in a separate area from the lot you are bidding on, so it is important to have good notes and determine ahead of time how
much you are willing to spend on the item.
4. The auctioneer will open the bidding with a starting bid. This is generally higher than what the actual initial bid amount is, and it
is acceptable to suggest a lower starting bid to get the ball rolling. For personal property where an item has a reserve price, the
auctioneer will usually open the bidding at an amount higher than the reserve, then work backward until someone puts in an initial
bid.
5. You do not have to start bidding at the beginning of the call. It is acceptable to jump in at any time until the auctioneer lowers
the gavel and declares the item “sold.” In all reality, it is not even necessary to start bidding until the price gets into the price
range you were expecting to pay. Auction bidding is very exciting, the chant is very alluring, and the competition makes for some
high adrenaline moments, so don’t wear waste your energy by jumping in too soon and risking another serious bidder wearing you
down. You don’t want to lose the auction simply from mental exhaustion. So be patient and bid when you feel you have the best
chance at winning the auction. Remember the auctioneer will always call a “going once, going twice..” before dropping the
hammer, giving one last second to make another bid if you choose.
6. With personal property, if similar lots are listed together, and you win the first lot, you may be given the chance to also purchase
the other similar lots for the same amount.
7. When you decide to bid, it is customary to make your intention known by raising your bid card, hand, nodding to an auction
assistant who will yell an affirmative cry to the auctioneer, or make some other intelligible signal or gesture to the auctioneer. You
can also place a bid simply by calling out the next bid increment being sought after by the auctioneer. For high priced items such
as real estate, you probably won’t be permitted to reduce the bid increment during the beginning of the bidding. Only when most
of the bidders have dropped out and a few serious contenders remain will it most likely be permissible to change the bid
increment. For example, if the price has been going up in $10,000 increments and bidding has slowed at $150,000, you might call
out “$155,000” and the auctioneer may accept it. However if the bidding is going steadily and a great number of people are
readily jumping in with the increment being called, the auctioneer isn’t going to accept a bid lower than the going increment.
8. Once you start bidding, the auctioneer will look back to you each time the bid is raised by someone else. You then have the
option to increase your bid, at which point the auctioneer will return to the other person, and so on. You will continue to be
acknowledged for bids until you make a clear indication that you do not wish to continue. Typically, a shaking “No” of the head is
sufficient to remove yourself from the bidding.
9. If your bid is the final bid when the auctioneer calls the item or property “sold,” you have won the auction and are the new
rightful owner. Remember that with personal property auctions, the auction company isn’t liable for the items once you buy them,
so it is your responsibility to make sure they get removed from the sale safely and in their entirety. Don’t leave your items
unattended, as unscrupulous auction attendees are out there who will make light work of walking off with your newly won item
while you celebrate. This isn’t to say this is common, but just that you should use caution and keep an eye on the items you have
just won.
10. Congratulations! You have just attended and participated in what was hopefully an enjoyable purchasing experience! You
can now understand why buying at auction is so much fun, and in many cases, personally and financially rewarding.