Auction Terminology

This glossary is intended for informational purposes only. No representation is made as to the accuracy or completeness of its contents and it does not constitute an official text or an administrative rule.

Types of Auctions

All auctions are with reserve unless the personal or real property are in explicit terms put up without reserve.

1. Auction With Reserve

The auctioneer may withdraw the goods at any time until he/she announces completion of the sale. The goods may be put up subject to the seller's confirmation or subject to a certain reserve price. At an auction with reserve the seller has the right to reject or confirm a bid. This does not automatically give the seller, or anyone acting on the seller's behalf, the right to bid. It is not required to announce the reserve price when it is met.

2. Auction With Reserve and the Seller Reserving the Right to Bid

The auctioneer may withdraw the goods at any time until he/she announces completion of the sale. The goods may be put up subject to the seller's confirmation or subject to a certain reserve price. The seller, or someone acting on the seller's behalf, including the licensee, may bid, provided that full disclosure has been made that liberty for such bidding is retained. A licensee shall not knowingly receive such a bid without this full disclosure.

3. Absolute Auction

It is the auctioneer's and the auction firm's responsibility to make sure that the seller fully understands the law regarding absolute auctions. After the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless a bid is not made in a reasonable time. An auction without reserve means an absolute auction.

a. An auction cannot be advertised absolute or with similar meaning unless all of the following are met:

(1.) There are no liens or encumbrances, except current taxes, or all lien holders sign the absolute auction contract or a binding commitment agreeing to sell to the highest bidder, or a financially responsible person, firm or corporation signs the absolute auction contract or a binding commitment to guarantee that the liens will be paid regardless of the high bid;

AND (2.) There exists a bona fide intent to transfer ownership at the time of advertising and at the time of the auction regardless of the bid or bidder;

AND (3.) The listing contract states that the auction is absolute or without reserve and that in no way shall the seller, or anyone on the seller's behalf, bid.

b. The above does not prohibit:

(1.) A secured party from bidding as long as this does not establish a reserve;

(2.) An individual involved in dissolution of marriage, partnership, or corporation from bidding following that dissolution; or

(3.) The non-misleading advertising, with equal emphasis, of absolute and reserve items in the same auction.

c. Except as noted above, the seller may not bid at an absolute auction, nor may anyone bid upon his/her behalf. A licensee shall not knowingly receive such a bid by or on behalf of the seller.

Buyer's Premium

A fee charged to buyers at some auctions. The buyer's premium is a percentage that is added to the last or final bid amount to determine the actual selling price. If the item selling is personal property, the sales tax is figured on the bid price plus the premium. If the item is real estate, the sale price (what is recorded on the deed) is the bid price plus the premium. Using the buyer's premium is the seller's decision and should be clearly stated in the auction contract. The buyer’s premium is paid over to the seller, unless the seller transfers this right over to the auctioneer or auction firm in the auction contract. At all auctions that include a buyer’s premium, the amount of the buyer’s premium shall be announced at the beginning of the auction and a written notice of this information shall be conspicuously displayed or distributed to the public at the auction site.

Goods

Real and personal property including chattels, merchandise, and commodities of any form or type which may lawfully be kept or offered for sale.

Personal Property

All goods and interests other than real property including chattels and commodities. Title for personal property sold at auction passes when the auctioneer accepts the final bid and announces the item sold (at the fall of the hammer).

Chattel

Moveable personal property, such as furniture, automobiles and livestock.

Commodities

Interest in agricultural products, silver, gold, and other products customarily sold or traded in commercial markets; may or may not be chattels.

Real Property/Real Estate

Land and all interests therein, including all improvements to the land, such as buildings, fences, and fixtures. Title for real estate sold at auction passes at closing with delivery and acceptance of the deed.

Consignment

Unless otherwise modified by written agreement, the act of delivering or transferring goods or real estate in fact or constructively to an auctioneer or the auctioneer’s agent in trust for the purpose of resale at auction whereby title does not pass to the buyer until there is an auction indicating a sale. Consignment may also mean a bailment for sale.

Consignor

The person or authorized agent or entity that consigns goods to an auctioneer. The consignor is usually the seller.

Consignee

The auctioneer, apprentice auctioneer, or auction firm to whom goods are entrusted by another (consignor) for sale at auction.

Contract

A voluntary oral or written mutual agreement by competent parties with mutual promises upon legal consideration, that creates, modifies, or destroys a legal relationship.

Auction Contract or Agreement

The agreement between the auction firm or the auctioneer and the seller (or his/her agent) where the parties agree to the offering of certain personal or real property for sale at auction as set forth in the contract. All auction contracts or agreements are required by law to be written and must contain the terms and conditions upon which the auctioneer or auction firm received the property for sale. There must be a signed auction contract or agreement before any advertising is begun. A signed copy of the contract or agreement must be provided to the owner and the auctioneer or auction firm must retain a copy.

Contract Discharge and Termination

Generally, most auction contracts or agreements are discharged or terminated in one of the following ways: 1. Completion of the auction followed by a proper accounting and full settlement. 2. Termination by the mutual agreement of all parties. If the auction has not yet been advertised, the auctioneer or the auction house operator and the seller can mutually agree to cancel the auction and terminate the contract. 3. Withdrawal of the seller or the resignation of the auctioneer or auction firm if either can demonstrate that the other is not properly discharging his/her duties under the listing contract.  4.  By court order.

Auction Sales Contract

The agreement to sell and buy certain goods between the seller and the buyer, with the auctioneer acting as the seller's agent. The majority of auction sales contracts for personal property are oral when the auctioneer announces the item sold or by the fall of the hammer. All auction sales and purchase contracts for real property are required to be in writing.

Encumbrance

Any binding adverse interest, claim, charge, or liability on an item which in some manner burdens or diminishes the value of that item. The most common encumbrance is a lien.

Lien

An adverse claim or charge against an item when that item is being used as collateral for a debt.

Additional Info:

  • Licensees may generaly bid on their own behalf provided that this has been fully disclosed to the bidders and the seller.
  • If a bid is made 'while the hammer is falling' in acceptance of a prior bid, the auctioneer may reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
  • Regardless of the type of auction, a bidder can always retract his/her bid at any time before an item sells (before the hammer falls). If a bidder does retract his/her bid this does not automatically revive any of the previous bids.
  • An auctioneer, at his/her discretion, can accept or refuse bids from anyone who lacks contractual legal capacity such as a minor, an intoxicated person, or someone who is mentally incompetent.
  • An auctioneer may reject or refuse to accept bids that are considered trifling increases over the preceding bid.