TOP THREE AUCTION LIES PEOPLE BELIEVE IN OHIO!
Here in Ohio, many people who attend auctions regularly think they have a solid understanding of how auctions work in Ohio, and what is right and what is wrong. The auction industry in Ohio is managed and controlled by the Department of Agriculture/Auctioneer Division. They make the rules, and all rules are posted clearly on their website.
Auction Lie #1 – There are lots of different kinds of auctions in Ohio – live, online, absolute, reserve, minimum bid, sealed bid, simulcast, English auctions, Dutch auctions, Chinese auctions, etc.
TRUTH: The Department of Agriculture in Ohio only recognizes two specific types of auctions. Absolute and Reserve. Per their own website, here are the definitions according to the governing body:
ABSOLUTE AUCTION: means an auction of real or personal property to which all of the following apply:
(1) The property is sold to the highest bidder regardless of the price and without reserve;
(2) The Auction does not require a minimum bid.;
(3) The Auction does not require competing bids of any type by the seller or an agent of the seller;
(4) The seller of the property cannot withdraw the property from auction after the auction is opened and there is Public Outcry or solicitation for bids.
RESERVE AUCTION: means an auction in which the seller or an agent of the seller
(1) reserves the right to establish a stated minimum bid and
(2) has the right to reject or accept any or all bids, and
(3) has the right to withdraw the real or personal property at any time prior to the completion of the auction by the auctioneer.
Auction Lie #2 – If an auctioneer receives a bid after public outcry that is above the stated reserve price then the item being auctioned will be sold to the highest bidder after that point.
TRUTH: As per the definition of Reserve Auction above, regardless of the stated reserve price or bid received, the seller always has the right to accept or reject any or all bids AND has the right to withdraw the auction item prior to the announcement of sold by the auctioneer.
People will ask, then, what’s the point of a reserve auction? Again, per the rules and regulations of the Ohio Department of Agriculture/Auctioneer Division, an auctioneer has the sole responsibility to represent the seller and only the seller. A reserve auction will therefore work in the best interest of the seller, protecting them from an unacceptably low price.
But wait! There is a flip side to that thought process. It has been proven time and again that the difference between an absolute auction and a reserve auction is the crowd that they draw.
In an absolute auction, bidders know full well that, barring some unknown circumstance, it is very likely that there will be a new owner for the item being auctioned when the auctioneer says sold.
Imagine the frustration of bidders when, after traveling some unknown distance and time to attend an auction for an item they have every intention of being the high bidder for, the seller declines to sell that item either claiming the price was not good enough or for whatever reason the seller deems valid.
Bidders don’t like investing their time, energy and expenses to come home empty handed from an auction they intended to buy. Losing to another bidder is one thing….deeper pockets usually always win and people understand that. But – having the proverbial rug pulled out from under them when they are the high bidder is a totally different animal.
For mainly that reason, people tend to shy away more from reserve auctions and the word reserve in reference to an auction will generally draw a smaller crowd.
Auction Lie #3 – If a real estate or personal property is being sold at auction, it is because of a distressed situation. Someone died or somehow the property is damaged and will not sell retail, or in the case of real estate the house and/or land has a serious defect that means the new buyer will be handed the keys to a major headache.
TRUTH: The Auction Method of Accelerated Marketing is the fastest growing form of asset conversion available to sellers today. “What’s old is new again!” is an age old saying that is coming to bear with regard to auctions. Real estate agency and brokers really only came on the scene in the early 1900’s and only really got to be big business in the middle of the century. Auction marketing has been around since the time before Christ! Even today, in many parts of America today, auctions are the leading method of converting unwanted real & personal property to cash quickly, transparently and efficiently.
It only takes a few seconds to do a Google search for “auctions”, “luxury auctions”, or “online auctions” to see the explosive growth in the auction industry. Searching for “luxury home auctions” brings up many websites of companies that only sell multi-million dollar homes at absolute auction only!! I think everyone would agree, after looking at some of these properties, there is nothing distressed about them at all.
People who have the money to own these McMansions know that they don’t want their home on the market for months or years, they want fair market value and they want it sold quickly. Auctioning their property satisfies all their requirements.
That’s it for this week. Stay tuned, sign up for our newsletter and I’ll be back next week for more exciting information about the auction industry.