Frequently Asked Questions
What is the difference between an absolute auction and a reserve auction?
There are two basic types of auctions: Reserve Auction and Absolute Auction. These have been defined in law and there are several distinct differences between the two.
A reserve auction is one where the seller sets a minimum or reserve price that must be reached in order to sell. Should the bidding not reach the reserve amount the seller has no obligation to sell, it is totally up to the seller in this case. Sellers can also have the sale subject to seller confirmation and either accept or reject the final bid at their discretion. In reserve sales, where it is disclosed, the seller can actually bid or they can designate someone to bid on there behalf. All auctions not advertised as absolute are presumed to be reserve auctions
Absolute auctions are those in which the real or personal property is sold to the highest bidder regardless of price. Once an auctioneer has asked for bids and received one, that item or lot can not be withdrawn. The seller nor anyone acting on his behalf is allowed to bid with very few lawful exceptions. The seller can bid if this is to settle the martial assets in a case of divorce; if it involves the dissolution of a business, corporation, partnership, trust or limited liability company.
Be advised the information above will tend to vary slightly from state to state that we conduct auctions in. We will be glad to cover those differences based upon where the auction will take place in the consultation.
As an example, the following is from the Kentucky Board of Auctioneers website:
Types of Auctions
All auctions are presumed to be with reserve unless they are explicitly absolute or without reserve.
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.
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, 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.
It is the auctioneer's and the auction house operator'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.
An auction cannot be advertised absolute or with similar meaning unless (a), (b), and (c) are met.
(a) There cannot be any 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.
(b) There must be 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.
(c) The listing contract must state that the auction is absolute or without reserve and that in no way shall the seller, or anyone on the seller's behalf, bid.
The above does not prohibit:
(a) A secured party from bidding as long as this does not establish a reserve.
(b) An individual involved in dissolution of marriage, partnership, trust, limited liability company, or corporation from bidding following that dissolution.
(c) The non-misleading advertising, with equal emphasis, of absolute and reserve items in the same auction.
Except as noted above, the seller may not bid at an absolute auction, nor may anyone bid upon his behalf. A licensee shall not knowingly receive such a bid by or on behalf of the seller.
Which is better between an absolute or reserve auction, which one should I have?
Generally speaking the difference between the two types can be the difference between night and day. An absolute auction marketed professionally will no doubt bring the highest results and greater participation among buyers. The simple fact is that buyers know that should they be the high bidder at an absolute sale they will be the new owner, this creates a greater incentive to attend. Sales that are with reserve normally require increased marketing efforts and expenditures that will not necessarily provide a similar result. The question that we pose to sellers that helps identify the difference is - If you were a buyer and there were multiple auctions going on at the same time, for items you’re interested in, with the only difference between them being reserve or absolute, where would you go? Now this doesn’t mean a reserve sale can’t be successful because it can. After this brief explanation, it would be best to contact us.
Usually the decision on which type of auction to have for the seller depends on several factors that only the seller can answer. During our consultation and discovery process we will be able to answer that based upon all the relevant facts and identified constraints. We should be able to provide solutions to your unique situation once we understand the situation and your goals.
Does the owner/seller have to participate and what obligations do they have?
In some cases, sellers will be engaged from the very beginning to the end however some don’t nor do they have to be involved. Depending on the type of auction and the assets involved, it might be cost effective for the seller to assist in the setup/clean up phase but it’s not necessary. We’ve worked with plant managers, plant engineers and maintenance staff that can be extremely valuable when we are dealing with highly specialized equipment and inventories. No matter the situation and constraints we face we can provide professional results.
The seller should be able to provide clear title to all the assets being sold. In some cases, if there are liens, we will need to work with lenders and seek their prior approval for the sale. The seller must also provide access to the assets or real estate and insure that we will continue to have access for the removal or transfer period. We may also need to work with the landlord in some cases which we have done in the past. We work hard to offer solutions to problems that some might see as insurmountable.
What are the auctioneer's responsibilities?
We will provide services that include cleanup, setup, organizing, advertising and auction management including supervised removal when necessary.
Once we agree and sign a contract, how long can we expect the process to take?
The process will normally take between 6 to 8 weeks from the initial setup and marketing to auction day and the final removal period. This is the optimum amount of time for an auction and allows for better marketing saturation including the search ability of keywords on the internet. In some cases, we can expedite the process however if we reduce this time below 4 weeks or less it may have an impact on the prices realized.
What happens at an auction?
On auction day, buyers will arrive and begin registering at the check-in/cashier station. They will receive a bidder number after registering which requires them to provide the clerk with a state issued ID. At that time, they may be given a copy of both the terms and conditions along with a lot catalog. Normally about ten minutes prior to the start of the sale some announcements will be given including a reminder for the buyer to register. At the start of the sale, announcements will be made, the terms and conditions will be read over the PA and an opportunity for the bidders to ask questions will take place. Next the auctioneer, ringmen and staff will start selling and the fun and excitement begins.
Because we use a computerized & wireless clerking system the buyer can check on their balance and pay at any time or multiple times during the sale. The system keeps track of all their information along with their bids in real time without any lag as seen in the primitive paper clerking methods used elsewhere. As part of the process we record the audio and video of the check in process so that we will have a valid record of the buyers registering and settling their balances. During the sale, we also record the audio to help ensure accuracy which gives us an opportunity to address any problems with bidders not remembering what they bid.
As the last lot is auctioned off, the auctioneer will briefly remind buyers to pay and remind them of the removal periods. This will begin the removal process which is usually fairly quick and efficient. Usually the staff will remain a couple of hours after the sale to allow the removal of any smalls buyers wish to remove.
What about bad weather, competing auctions and risk of other events and will it interfere with our auction?
Weather can play a part in the auction depending on the type of auction you select but sometimes in ways you might not expect. For a live onsite auction, bad weather will likely increase the number of serious buyers because they mistakenly think other buyers will not show up because of the weather, its counter intuitive. This is not to say that extreme weather like snow storms wouldn’t have a greater impact and cause a live onsite sale to be postponed. The risk here would include the cost to advertise the sale twice, lease/rent, staffing and the other postponement costs. Rarely would an auction need to be canceled and almost never if an online method is used.
Competing auctions can influence the sale and that’s why its critical to have the effect marketing campaigns & marketing professionals we use. Other events such as sporting events can also have an impact on the sale and too it depends on the type of sale used. Some live onsite sales could be influenced greater than some on-line auctions. There are normally some type of competing events or even other family functions that can distract some buyers. The easier it can be made for the buyer to participate the better and we address this in several ways.
Can you provide services other than auction if I’m not convinced an auction is for me or if I’m in a situation that won’t allow for an auction?
Yes, we can provide other options including buyouts and other liquidation methods. Just contact us for a free consultation and we will be glad to review your options.