Auction FAQ and Terminology
Question: What situations warrant using the auction method of marketing?
Question: Is the auction method ever used as a first selling method?
Question: Are real estate auctions only for distressed properties?
Question: Can there be a reserve or a minimum bid on an item or piece of property?
Question: If the high bid is less than my predetermined minimum value can I accept it?
Question: How long will the whole process take?
Question: Where will the auction take place?
Question: How long after the auction occurs will I get paid?
Question: What factors determine the success at an auction?
Question: What are the terms of an auction?
Answer: The terms and conditions are devised to protect the seller and the process of the auction method. Properties are sold “as is, where is” with all faults. The purchase agreement is produced with no contingencies, including those for inspections and financing.
- Absentee Bid - A procedure which allows a bidder to participate in the bidding process without being physically present. A bidder submits an offer prior to the auction.
- Absolute Auction - The property sells to the highest bidder regardless of price. This typically generates a much greater interest among potential buyers resulting in greater attendance at the auction , and a higher final sale price for the item in question.
- Appraisal - The act or process of estimating value.
- 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 an item in a public forum through open and competitive bidding.
- Auctioneer - The person whom the seller engages to direct, conduct, or be responsible for a sale by auction.
- Bank Letter of Credit/Guarantee - A letter from a bank certifying that a named person is worthy of a given level of credit. Most often this is required when paying with none certified funds.
- Bid - A prospective buyer’s indication or offer of a price he or she will pay to purchase an item at auction. Bids are usually in standardized increments established by the auctioneer.
- Bid Assistant - A person who assists the bidder and the auctioneer. Calls out bidders’ bids, answers questions, and makes the bidder’s comfortable with the auction process
- Bidder Number - Individually numbered card with your unique bidder number. This will identify you to the auctioneer as the successful bidder.
- Bidder Registration - The process of registering your identity and ability to pay for successful bids. This is essential before bidding.
- 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’s Premium - An amount (usually a percentage) that is added to the winning bid (hammer price) to determine the contract selling price which the buyer pays for the property being sold. The use of the buyer’s premium is so effective because it benefits both the buyers and the sellers. Sellers benefit because it helps to defray many of the expenses associated with conducting an auction. The buyer benefits because without the use of this tool, there may not have been an auction. The open and competitive bidding process might not exist if the buyer’s premium were not used to offset some of the auction related expenses.
- Choice - When selling choice, the auctioneer is offering more than one item up for auction at a time. The winning bidder then has the choice to take one item or multiple items. If the bidder wishes to take more than one item, the bid price will be multiplied by the amount of items the bidder chooses.
- Clerk - The person employed by the principal auctioneer or auction firm to record what is sold and to whom and for what price.
- Conditions of Sale - The legal terms that govern the conduct of an auction, including methods of payment, terms, buyers premiums, possession, reserves and any other announced by the auctioneer prior to the start of the auction.
- Consignor - The person or authorized agent or entity that consigns goods to an auctioneer. The consignor is usually the seller.
- Due Diligence - The process of gathering information about the condition and legal status of assets to be sold.
- Hammer Price - The highest bid which is accepted by the auctioneer
- Multiple Property Auction - When selling choice, the auctioneer is offering more than one item up for auction at a time. The winning bidder then has the choice to take one item or multiple items. If the bidder wishes to take more than one item, the bid price will be multiplied by the amount of items the bidder chooses.
- On-Site Auction - An auction conducted on the premises of the property or items being sold.
- Personal Property - All goods and interests other than real property including chattels and commodities. Title for personal property sold at auction passes when the auctioneer accepts the final bid and announces the item sold (at the fall of the hammer).
- Preview - Specified date and time items or real estate is available for prospective buyer viewing.
- Real Property/Real Estate - Land and all interests therein, including all improvements to the land, such as buildings, fences, and fixtures. Title for real estate sold at auction passes at closing with delivery and acceptance of the deed.
- Reserve Auction - The seller establishes a confidential reserve price and has the right to accept or decline the highest bid if it falls below the established reserve. If the reserve auction method is chosen, it is imperative that the reserve price be realistic.
- Sealed Bid Auctions - Each bidder submits a single, irrevocable bid without knowledge of the other bids. When the bidding period is closed, the bids are opened simultaneously, and the winner is the highest bidder.
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