Are competitive pre-auction bids pre-auction?
The more and more online bidding platforms are used for simulcast auctions — and in the case of pre-live auction bids being accepted — there appears to be increased confusion. We wrote about one type of such confusion here:https://mikebrandlyauctioneer.wordpress.com/2018/09/03/simulcast-auctions-how-they-work-and-how-they-dont/
For example, if a simulcast auction is scheduled for December 15 and the online platform opens up December 3 for bidding to be used as the opening bids at the live/simulcast auction, the question often is, “When did this auction start?”December 3 or December 15?
While not an issue in a with reserve auction, in a without reserve (absolute) auction, once a bid is placed within a reasonable time, the lot (property) cannot be withdrawn. This is from the UCC 2-328 (3):https://mikebrandlyauctioneer.wordpress.com/auction-treatise/%C2%A7-2-328-sale-by-auction/
The nature of accepting competitive bids pre-live auction suggests to many that the auction has already started. For example, if December 3 someone bids $100,000 and December 6 someone bids (outbids the other bidder) $125,000 … has the auction already started?
What is the significance of such? If a bid is accepted December 3 — in an absolute auction — the property cannot be withdrawn thereafter. If these are merely bids “to be executed December 15” then the property could be withdrawn, but accepting competitive bids prior sure makes it look like the auction has already started.
Certainly disclosure of exactly what these pre-December 15 bids are would assist with bidders (and the public) understanding if they are actual bids or bids “to be executed” but often perception is more important than reality. “We take competitive bids prior to our auction where we take competitive bids?”
In summary, if an auctioneer wants to retain the right to withdraw property up until the live/simulcast auction (in our example, December 15, or even thereafter) it would be best to hold a with reserve auction. If on the other hand, the auctioneer wishes to hold a without reserve (absolute) auction, then anycompetitive bidding may signal the right of withdrawal is voided.
This article has been published with permission from the author.
The original article and image can be found here.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.