Auction Glossary and Terms of Auction:
— A —
AARE (Accredited Auctioneer, Real Estate)
The professional designation awarded by the National Auctioneers Association (NAA) Education Institute to qualified real estate auctioneers who meet the educational and experiential requirements of the Institute and who adhere to a strict code of ethics and standards of practice.
A procedure that allows a bidder to participate in the bidding process without being physically present at the auction. Generally, a bidder submits an offer on an item prior to the auction. The auctioneer or his representative usually handles absentee bids under an established set of guidelines. The particular rules and procedures of absentee bids are unique to each auction company.
A person (or entity) who does not attend the sale but submits, in advance, a written or oral bid that is the top price he or she will pay for a given property.
An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent. Also known as an Auction Without Reserve. This type of auction means the property will be sold to the highest bidder regardless of price.
Accounting of Sale
A report issued to the seller by the auctioneer detailing the financial aspects of the auction.
A person who acts for or in the place of another individual or entity by authority from them.
The act or process of estimating value.
An auctioneer who is in training, operating under the supervision of a licensed or experienced auctioneer.
Selling the property without warranties as to the condition and/or the fitness of the property for a particular use. Buyers are solely responsible for examining and judging the property for their own protection. Otherwise known as “As Is, Where Is” and “In its Present Condition.”
A method of selling property in a public forum through open and competitive bidding. Also referred to as: public auction, auction sale or sale.
The podium or raised platform where the auctioneer stands while conducting the auction. “Placing (an item) on the auction block,” means to sell something at auction.
Auction Listing Agreement
A contract executed by the auctioneer and the seller, which authorizes the auctioneer to conduct the auction and sets out the terms of the agreement and the rights and responsibilities of each party.
An individual who contracts with sellers for the auction method of marketing property. In the case of real property, he or she may not actually conduct the sale but is directly responsible for all aspects of marketing the property.
The method of marketing real property utilizing the auction method of sale.
The plan for pre-auction, auction day and post auction activities.
The price of a property obtained through the auction method of marketing.
Auction Subject to Confirmation
See Reserve Auction
The price which a particular property brings in open competitive bidding at public auction.
Auction With Reserve
An auction in which the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time. Michael Hoffman & Associates discourages auctions with a high reserve price and generally asks sellers to disclose any minimum or reserve price prior to an auction. In the case of bankruptcy and certain court-ordered auctions, properties are generally sold subject to a reserve price or final ratification by the Court.
Auction Without Reserve
See Absolute Auction
The person whom the seller engages to direct, conduct, or be responsible for a sale by auction. This person may or may not actually call or cry the auction.
An auctioneer hired by the principal auctioneer.
— B —
An auction of one or more properties conducted in a meeting room facility, hotel convention facility, or other indoor location. At this type of auction, it is assumed that the bidders have inspected the property and are usually shown digital photos and other descriptions of each property as it is offered for sale.
Bank Letter of Credit
A letter from a bank certifying that a named person is worthy of a given level of credit. Often requested from prospective bidders or buyers who are not paying with currency at auctions.
A prospective buyer’s indication or offer of a price he or she will pay to purchase property at auction. Bids are usually in standardized increments established by the auctioneer.
A form executed by the high bidder confirming and acknowledging the bidders identity, the bid price and the description of the property. Also known as Memorandum.
Individuals who are positioned throughout the attendees at the auction to assist the auctioneer, spot bidders and assist prospective bidders with information to help them in their buying decision. Also known as ringmen, bid consultants, bid spotters, or groundsmen.
The person who actually “calls,” “cries” or “auctions” the property at an auction, recognizing bidders and acknowledging the highest bidder. Commonly known as the auctioneer.
The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value. This is a violation of the Sherman Anti-trust Act.
The number issued to each person who registers at an auction.
The package of information and instructions obtained by prospective bidders that pertains to the property to be sold at an auction event. Sometimes called a bidder packet or due diligence package.
A method of sale whereby the successful high bidder wins the right to choose a property or properties from a grouping of similar or like-kind properties. After the high bidder’s selection, the property is deleted from the group, and the second round of bidding commences, with the high bidder in round two choosing a property, which is then deleted from the group and so on, until all properties are sold. This type of bidding is very popular when selling building lots, timeshares and condominiums.
Bookkeeper or Clerk
The person who is responsible for the accounting and paperwork at an auction sale.
An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.
A real estate broker who represents the buyer and, as the agent of the buyer, is normally paid for his/her services by the buyer.
An advertised percentage of the high bid or flat fee added to the high bid to determine the total contract price to be paid by the buyer.
— C —
Certified Auctioneers Institute. The professional designation awarded to practicing auctioneers who meet the experiential, educational and ethical standards set by the National Auctioneers Association Education Institute.
A series of on site auctions advertised through a common promotional campaign where the properties are located very close together. The auctioneer and bidders travel from location to location where each auction is called/cried on-site.
The costs involved in holding a property which is intended to produce income (either by sale or rent) but has not yet done so, i.e., insurance, taxes, maintenance, management.
Catalog or Brochure
A publication advertising and describing the property(ies) available for sale at public auction, often including photographs, property descriptions, and the terms and conditions of the sale.
A Latin term meaning “let the buyer beware.” A legal maxim stating that the buyer takes the risk regarding quality or condition of the property purchased, unless protected by warranty.
The person employed by the principal auctioneer or auction firm to record what is sold and to whom and for what price.
The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value or when the auctioneer accepts a fictitious bid on behalf of the seller so as to manipulate or inflate the price of the property.
The fee charged to the seller by the auctioneer for providing services, usually a percentage of the gross selling price of the property established by contract (the listing agreement) prior to the auction.
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. Usually included in published advertisements or announced by the auctioneer prior to the start of the auction.
An agreement between two or more persons or entities, which creates or modifies a legal relationship.
A real estate broker who registers a prospective buyer with the auction company, in accordance with the terms and conditions for that auction. The broker is paid a commission only if his prospect is the high bidder and successfully closes on the property. Also known as a participating broker.
Sequence of key tasks to be done by auction contractor or other designated parties on specified dates, leading to desired goals.
— D —
The representation of opposing principals (buyers and seller) at the same time.
The process of gathering information about the condition and legal status of assets to be sold.
— E —
The sale of property left by a person at his or her death. An estate auction can involve the sale of personal and/or real property.
— F —
A foreclosure auction may be conducted when a lender cannot collect on a mortgage or loan and has petitioned a court to allow or order the sale.
— G —
Graduate, Personal Property Appraiser (GPPA)
The professional designation awarded by the NAA Education Institute (formerly Auction Marketing Institute) to qualified property appraisers who meet the educational and experiential requirements of the Institute and who adhere to a strict code of ethics and standards of practice.
See Bid Assistants
— H —
Price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel.
— I —
An Internet auction is where the property is offered for sale on the Internet only and there is no live auctioneer or live bidders. The auction has a specific open and close date and time, with fixed bid increments. A bidder will enter their bid against other Internet bidders or they may enter a “Proxy Bid” that will bid up to their predetermined high bid amount.
— L —
Live Internet Auction
A live Internet auction is where the auction company utilizes technology that broadcasts their auction over the Internet in real-time and allows on-line bidders (from around the world) to competitively bid during the auction as if they were attending in person. Bidders must be registered and meet the same deposit and other financial qualifications as live bidders. Live Internet auctions also provide for proxy bidding. The main benefit is they allow for a qualified bidder to participate in the live event from the comfort of their home, hotel, or office.
See Auction Listing Agreement.
A real estate broker who has a listing on a property and cooperates with the auction company by allowing the auction agreement to supersede his/her listing agreement.
— M —
The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.
Sometimes also referred to as a “Bidder Acknowledgment,” or “Broker Acknowledgment,” the memorandum is signed by those parties either on the auction floor or in the contract room.
Minimum Bid Auction
An auction in which the auctioneer will accept bids at or above a disclosed price. The minimum price is always stated in the brochure and advertisements and is announced at the auction.
A Multi-Par auction is where bidders may bid on a single property sold either as an entire parcel or in multiple parcels. A good example is when a tract of land such as a farm or timberland that would traditionally be sold to a large company due to the size and price but would make excellent home sites, ranches or other uses in smaller parcels. The property would be parceled or grouped prior to being offered for sale and advertised as such. The property is then simultaneously offered as whole and partial parcels to bidders. If a 1,000 acre parcel was divided into 50 lots of 20 acres each and offered for sale to individuals, the bidders on the smaller parcels are exercising a form of group buying power in that for every $1,000.00 bid increment, it will create a $50,000.00 bid increment for the parties bidding on the entire parcel. The Multi-Par auction is based upon deriving the maximum price for the seller, no matter which group of bidders wins.
A group of properties offered through a common promotional campaign. The properties to be auctioned may be owned by one seller or multiple sellers. A Multi-Property auction may use any of the types of auctions described here. This type of auction offers both buyers and sellers many advantages, the seller a shared advertising and promotional campaign, the buyers a wider variety of property at a single auction.
Properties owned by many sellers, offered through a common promotional campaign are auctioned in a single event.
— N —
National Auctioneers Association
Founded in 1948, the National Auctioneers Association is an association of individual auctioneers united to promote the mutual interests of its members; formulate and maintain ethical standards for the auction profession; promote the enactment of just and reasonable laws, ordinances and regulations affecting auction selling; make the public more aware of the advantages of auction selling; and generally improve the business conditions affecting the auction profession.
National Real Estate Auction Committee
A national committee developed by the National Association of REALTORS® in April, 1990 to provide education to members concerning real estate auctions, identify issues and monitor, review and analyze trends affecting the real estate auction industry. It also is charged with formulating policies for consideration by other policy-making NAR Committees, its Executive Committee and Board of Directors.
A fee charged to the owner of a property offered at an auction with reserve when the property does not sell.
— O —
The first bid offered by a bidder at an auction.
An auction conducted on the premises of the property being sold.
— P —
See Cooperating Broker.
Most auction companies ask that you pay when you are finished bidding. Some may ask for down payments when you register, as in an auction of real estate. In many equipment auctions, bid-assistants will ask for deposits as your purchases are increasing. It’s good to ask about this prior to attending, so that you are prepared when you arrive. In the case of Absentee Bidding, you may be required to give a credit card and expiration date for payment if you are the successful bidder.
Specified date and time property is available for prospective buyer viewing and audits. Also known as Open House or Inspection.
Automatic bidding that increases your bid incrementally each time someone outbids you, until you win or reach your maximum bid.
— R —
A real estate broker, who does not have a listing on a property, but refers the auction company to a potential seller for an auction. Usually earns a flat fee commission for referring product to an auction company.
A process used in real estate auctions where a bidder has the opportunity to combine several parcels of land previously selected by other bidders, thereby creating one larger parcel out of several smaller parcels. This process is often used in conjunction with bidder’s choice.
The minimum price that a seller is willing to accept for a property to be sold at auction. Also known as the reserve price.
An auction in which the seller reserves the right to establish a reserve price, 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. See also Auction With Reserve.
— S —
The person designated by the auction company who is responsible for organizing the details of an auction. Also known as project manager.
Sales Tax Exemption
The need to provide a tax exemption certificate will vary from state to state in the U.S. If you are a dealer, call the auction company to ask what will be needed. If you have a dealer number for tax exemption purposes, carry it with you when you attend auctions.
A method of sale utilized where confidential bids are submitted to be opened at a predetermined place and time. Not a true auction in that it does not allow for reaction from the competitive market place. In some cases, this method of sale may work to the benefit of the seller as it forces a bidder to submit their best and final offer.
Entity that has legal possession, (ownership) of any interests, benefits or rights inherent to the real or personal property.
Subject to Confirmation
See Reserve Auction. Auctions are subject to confirmation for a variety of reasons, the most common be judicial or confirmation by the Court in a bankruptcy, collection or foreclosure sale.
— T —
Public sale of property at auction by governmental authority, due to nonpayment of taxes. There are many types of tax sales, from an IRS sale, to a local government enforcing the sale for collection of property taxes.
The period of time that an agreement is in effect.
Terms and Condition
The printed rules of the auction and certain aspects of the Purchase & Sale Agreement that are read and/or distributed to potential bidders prior to an auction sale.
When two or more bidders bid exactly the same amount at the same time and must be resolved by the auctioneer.
See Foreclosure and bankruptcy auctions. A sale at auction by a Trustee to enforce the terms and conditions of a mortgage and/or a deed of trust. A sale at auction overseen by a bankruptcy Trustee to satisfy creditors of a bankrupt party.
Types of Payments Accepted
This can range from cash only to cashier’s checks or personal checks and credit/debit cards. You will need a positive ID such as a driver’s license or other government ID when you register for bidder’s number at the auction.
— U —
Commonly known as the reserve price.
— W —
See Live Internet Auction. Technology that allows the auction company to broadcast auctions over the Internet in real-time and allows on-line bidders (from around the world) to participate in the auction as if they were attending in person. Bidders must be registered and meet the same deposit and other financial qualifications as live bidders.
Failure to reach the reserve price or insufficient bidding.