Common Auction Terminology

Absentee Bid
A procedure which allows a bidder to participate in the bidding process without being physically present. Generally, a bidder submits an offer on an item prior to the auction. Absentee bids are usually handled under an established set of guidelines by the auctioneer or his representative. The particular rules and procedures of absentee bids are unique to each auction company.

Absolute Auction
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.

Accounting of Sale
A report issued to the seller by the auctioneer detailing the financial aspects of the auction.

Advertising
Non-personal, paid communication such as newspaper, radio, direct mail, websites, bill boards, email campaigns and TV directed toward the general public or, in some cases, specific prospective client groups to provide information about the time, place, contents, and arrangements of an auction.

Agent
A person who acts for or in the place of another individual or entity by authority from them.

"As Is"
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."

Auction
A method of selling real estate in a public forum through open and competitive bidding. Also referred to as: public auction, auction sale or sale.

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.

 

Auction Value
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.

 

Auction without Reserve
(See "Absolute Auction")

 

Auctioneer
The person whom the seller engages to direct, conduct, or is responsible for a sale by auction. This person may or may not actually call or cry the auction.

 

Bid
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 bid is a legal, binding contract between the bidder and the auctioneer.

 

Bid Acknowledgment
A form executed by the high bidder confirming and acknowledging the bidder’s identify the bid price and the description of the property. Also known as Memorandum.

 

Bid Rigging
The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value.

 

Bidder Number
The number issued to each person who registers at an auction.

 

Bidder Package
The package of information and instructions pertaining to the property to be sold at an auction event obtained by prospective bidders at an auction. Sometimes called a bidder packet or due diligence

package.

 

Broker Participation
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.

 

Buyer
Is a person who buys or contracts to buy goods, assets or merchandise at auction.

 

Buyer’s Broker
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.

 

Buyer’s Premium
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.

 

Carrying Charges
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.

 

Caveat Emptor
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.

 

Collusion
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.

 

Commission
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.

 

Contract
An agreement between two or more persons or an entity which creates or modifies a legal relationship. The total obligation which results from the seller’s and buyer’s actions to sell and buy by auction.

 

Deposit
The amount of money required by the high bidder prior to or at the auction to show good faith in completing the purchase.

 

Due Diligence
The process of gathering information about the condition and legal status of assets to be sold.

 

Hammer Price
Price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel.

 

Listing Agreement
(See "Auction Listing Agreement")

 

Market Value
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.

 

Minimum Bid

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 auctions.

 

Minimum Opening Bid
The lowest acceptable amount at which the bidding must commence.

 

Multi-Seller Auction
Properties owned by many sellers, offered through a common promotional campaign are auctioned in a single event.

 

No-Sale Fee
A charge paid by the owner of property offered at a reserve auction when the property does not sell.

 

Opening Bid
The first bid offered by a bidder at an auction.

 

Online Bidding
The procedure of submitting bids electronically by a mobile device or computer.

 

Preview
Specified date and time property is available for prospective buyer viewing and audits. Also known as

Open House or Inspection.

 

Reserve
The minimum price that a seller is willing to accept for a property to be sold at auction. Also known as the reserve price.

 

Reserve Auction
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.

 

Sale
The passing of title from the seller to the buyer for a price or consideration.

 

Seller
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")

 

Terms
The period of time that an agreement is in effect.

 

Terms and Conditions
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.

 

Tie Bids
When two or more bidders bid exactly the same amount at the same time and must be resolved by the auctioneer. The auctioneer has the sole authority to determine the one and only high bidder.

 

UCC

The Uniform Commercial Code which defines auction terms and procedures.

 

Withdrawal

It is failure to reach the reserve price or insufficient bidding or removal of an asset from the auction.