What do all of those auction terms mean?
The following are some basic terms you might want to know when you go to an auction. Don't worry though. There isn't a test or anything. Just ask if you have questions.
Absentee Bid
This is a way that you can bid even if you cannot attend the auction in
person. Check with the auction of interest to see if this is available and how
they make the bids for you. Many places allow written absentee bids, phone-in
bids, and even online bidding. In written absentee bids, you
tell them what items to bid on and how high you will go. In phone-in
bidding, you are actually on the phone in person, but you have to let
them know what you want to bid on. Online bidding utilizes a
bidding platform which uses the Internet to transmit your bids. These practices
vary from auction to auction so be sure to ask each auction company you deal
with how they do it prior to bidding.
Appraisal
The act of 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 Block
The podium or raised platform where the auctioneer stands while conducting the
auction. "Placing (an item) on the auction block" means to sell
something at 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(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.
Auctioneer
The person whom the seller engages to direct, conduct, or be 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.
Bid Assistants
A form executed by the high bidder confirming and acknowledging the
bidder's identity, the bid price and the description of the property. Also
known as Memorandum.
Bid Caller
The person who actually "calls," "cries or "auctions"
the property at an auction, recognizing bidders and acknowledging the highest
bidder. Commonly known as the auctioneer.
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.
Bidder's Choice
A method of sale whereby the successful high bidder wins the right to choose
a property or properties from a grouping of similar or like-kind properties.
After the high bidder's selection, the property is deleted from the group, and
the second round of bidding commences, with the high bidder in round two
choosing a property, which is then deleted from the group and so on, until all
properties are sold.
Bookkeeper or Clerk
The person who is responsible for the accounting and paperwork at an auction
sale.
Buyer Premium
A percentage added on to your bid amount. Buyer premiums are used by many
auction houses as a way of spreading the cost of the event with the people who
benefit most from the opportunity to purchase; the buyer. It is an amount added
to the high bid in addition to the high bid and payable by the buyer. This
should be in the terms and advertising for the auction.
CAI
Certified Auctioneers Institute. The professional designation awarded to
practicing auctioneers who meet the experiential, educational and ethical
standards set by the National Auctioneers Association Education
Institute.
Catalog
If an auction company makes a catalog available to you, be sure to get one.
It can help you to know the description of the items sold and also how it will
be sold. There may be a quantity of the commodity in each lot being sold and
they may be for all one bid or so much apiece. Auction staff will be happy to
explain these differences to you and your catalog will help you follow along.
This way you won't miss an item that is important to you.
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.
Estate Sale
The sale of property left by a person at his or her death. An estate auction
can involve the sale of personal and/or real property.
Hammer Price
Price established by the last bidder and acknowledged by the auctioneer
before dropping the hammer or gavel.
National Auctioneers Association
An association of individual auctioneers united to promote the mutual interests
of its members; formulate and maintain ethical standards for the auction
profession; promote the enactment of just and reasonable laws, ordinances and
regulations affecting auction selling; make the public more aware of the
advantages of auction selling; and generally improve the business conditions
affecting the auction profession.
On-site Auction
An auction conducted on the premises of the property being sold.
Opening Bid
The first bid offered by a bidder at an auction.
Payment Arrangements
Most auction companies ask that you pay when you are finished bidding. Some may
ask for downpayments when you register, as in auction of real estate. In many
equipment auctions bid-assistants will ask for deposits as your purchases are
increasing. It's good to ask about this prior to attending so you are prepared
when you arrive. For absentee bidding you may need to give a credit car and
expiration date for payment, if you are successful.
Preview
Be sure to take advantage of the preview times made available for you to
look over the items being offered for sale. Many times, auction items are
slightly used so you will want to know if there are any defects, such as loose
or missing table legs, a vehicle that doesn't start, or glassware that has
chips or cracks. While these may be acceptable to you, it may affect the amount
you want to bid, so look before you bid. You will feel much more confident if
you do this.
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.
Sales Tax Exemption
The need to provide a tax exemption certificate will vary from state to state
in the U.S.
If you are a dealer, call to ask what will be needed. If you have a dealer
number for tax exemption purposes, carry it with you when you attend auctions.
Sealed Bid
A method of sale utilized where confidential bids are submitted to be opened at
a predetermined place and time. Not a true auction in that it does not allow
for reaction from the competitive market place.
Seller
Entity that has legal possession, (ownership) of any interests, benefits or
rights inherent to the real or personal property.
Tax Sale
Public sale of property at auction by governmental authority, due to
nonpayment of property taxes.
Terms and Conditions
"Terms and Conditions" are something you will likely see at every
auction you attend. They will vary a according to the type of commodity being
sold and the auction company. What we are showing you here are some things that
are typical and that you should know. Please be sure to check the Web site or
on-site glossary for each individual auction.
Types of Payments Accepted
This can range from cash only to cashier's checks or personal checks and
credit/debit cards. Many times you will need a positive ID such as a driver's
license or other government ID when you register for the first time.
Tie Bids
When two or more bidders bid exactly the same amount at the same time and
must be resolved by the auctioneer.
If you'd like to see more auction terms, in much more (yawn) detailed and formal language, The following is a glossary of real estate auction terms developed by the National Association of Realtors – Real Estate Auction Committee, and the National Auctioneers Association. While it is a real estate glossary, most of the terms apply to all types of auctions.
AARE (Accredited Auctioneer, Real Estate)
The
professional designation awarded by the NAA Education
Institute to qualified real estate auctioneers who meet the educational and
experiential requirements of the Institute and who adhere to a strict code of
ethics and standards of practice.
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.
Absentee Bidder
A
person (or entity) who does not attend the sale but submits, in advance, a
written or oral bid that is the top price he or she will pay for a given
property.
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.
Agent
A
person who acts for or in the place of another individual or entity by
authority from them.
Appraisal
The
act or process of estimating value.
Apprentice Auctioneer
An
auctioneer who is in training, operating under the supervision of a licensed or
experienced auctioneer.
"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 property in a public forum through open and competitive
bidding. Also referred to as: public auction, auction sale or sale.
Auction Block
The
podium or raised platform where the auctioneer stands while conducting the
auction. "Placing (an item) on the auction block" means to sell
something at auction.
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 Marketer
An
individual who contracts with sellers for the auction method of marketing property.
In the case of real property, he or she may not actually conduct the sale but
is directly responsible for all aspects of marketing the property.
Auction Marketing
The
method of marketing real property utilizing the auction method of sale.
Auction Plan
The
plan for pre-auction, auction day and post auction activities.
Auction Price
The
price of a property obtained through the auction method of marketing.
Auction Subject to Confirmation
(See "Reserve
Auction")
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 be responsible for a sale
by auction. This person may or may not actually call or cry the auction.
Auctioneer Subcontractor
An
auctioneer hired by the principal auctioneer.
Ballroom Auction
An
auction of one or more properties conducted in a meeting room facility.
Bank Letter of Credit
A
letter from a bank certifying that a named person is worthy of a given level of
credit. Often requested from prospective bidders or buyers who are not paying
with currency at auctions.
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.
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 Assistants
Individuals
who are positioned throughout the attendees at the auction to assist the
auctioneer, spot bidders and assist prospective bidders with information to
help them in their buying decision. Also known as ringmen, bid consultants, bid
spotters, or groundsmen.
Bid Caller
The
person who actually "calls," "cries or "auctions" the
property at an auction, recognizing bidders and acknowledging the highest
bidder. Commonly known as the auctioneer.
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.
Bidder's Choice
A
method of sale whereby the successful high bidder wins the right to choose a
property or properties from a grouping of similar or like-kind properties.
After the high bidder's selection, the property is deleted from the group, and
the second round of bidding commences, with the high bidder in round two
choosing a property, which is then deleted from the group and so on, until all
properties are sold.
Bookkeeper or Clerk
The
person who is responsible for the accounting and paperwork at an auction sale.
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 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.
CAI
Certified
Auctioneers Institute. The professional designation awarded to practicing
auctioneers who meet the experiential, educational and ethical standards set by
the Auction Marketing Institute, Inc.
Caravan Auctions
A
series of on site auctions advertised through a common promotional campaign.
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.
Clerk
The
person employed by the principal auctioneer or auction firm to record what is
sold and to whom and for what price.
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 entities which creates or modifies a
legal relationship.
Cooperating Broker
A
real estate broker who registers a prospective buyer with the auction company,
in accordance with the terms and conditions for that auction. The broker is
paid a commission only if his prospect is the high bidder and successfully
closes on the property. Also known as a participating broker.
Critical Path
Sequence
of key tasks to be done by auction contractor or other designated parties on
specified dates, leading to desired goals.
Dual Agency
The
representation of opposing principals (buyers and seller) at the same time.
Due Diligence
The
process of gathering information about the condition and legal status of assets
to be sold.
Estate Sale
The
sale of property left by a person at his or her death. An estate auction can
involve the sale of personal and/or real property.
Graduate, Personal Property Appraiser (GPPA)
The
professional designation awarded by the NAA Education Institute
(formerly American Marketing Institute) to qualified property appraisers who
meet the educational and experiential requirements of the Institute and who
adhere to a strict code of ethics and standards of practice.
Groundsman
(See
" Bid
Assistants")
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.
Listing Broker
A
real estate broker who has a listing on a property and cooperates with the
auction company by allowing the auction agreement to supersede his/her 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.
Memorandum
Sometimes
also referred to as a "Bidder Acknowledgment," or "Broker
Acknowledgment," the memorandum is signed by those parties either on the
auction floor or in the contract room.
Minimum Bid Auction
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.
Opening Bid
The
lowest acceptable amount at which the bidding must commence.
Multi-Property Auction
A
group of properties offered through a common promotional campaign. The
properties to be auctioned may be owned by one seller or multiple sellers.
Multi-Seller Auction
Properties
owned by many sellers, offered through a common promotional campaign are
auctioned in a single event.
National Auctioneers Association
An
association of individual auctioneers united to promote the mutual interests of
its members; formulate and maintain ethical standards for the auction
profession; promote the enactment of just and reasonable laws, ordinances and
regulations affecting auction selling; make the public more aware of the
advantages of auction selling; and generally improve the business conditions
affecting the auction profession.
National Real Estate Auction Committee
A
national committee developed by the NATIONAL ASSOCIATION OF REALTORS in April,
1990 to provide education to members concerning real estate auctions, identify
issues and monitor, review and analyze trends affecting the real estate auction
industry. It also is charged with formulating policies for consideration by
other policy-making NAR Committees, its Executive Committee and Board of
Directors.
Opening Bid
The
first bid offered by a bidder at an auction.
On-site Auction
An
auction conducted on the premises of the property being sold.
Participating Broker
See
Cooperating Broker.
Preview
Specified
date and time property is available for prospective buyer viewing and audits.
Also known as Open House or Inspection.
Referring Broker
A
real estate broker who does not have a listing on a property, but refers the
auction company to a potential seller for an auction. Usually earns a flat fee
commission for referring product to an auction company.
Regroup
A
process used in real estate auctions where a bidder has the opportunity to
combine several parcels of land previously selected by other bidders, thereby
creating one larger parcel out of several smaller parcels. This process is
often used in conjunction with bidder's choice.
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 Manager
The
person designated by the auction company who is responsible for organizing the
details of an auction. Also known as project manager.
Sealed Bid
A
method of sale utilized where confidential bids are submitted to be opened at a
predetermined place and time. Not a true auction in that it does not allow for
reaction from the competitive market place.
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")
Tax Sale
Public
sale of property at auction by governmental authority, due to nonpayment of
property taxes.
Terms
The
period of time that an agreement is in effect.
Terms and Condition
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.
Trustee's Sale
A
sale at auction by a trustee.
Upset Price
Commonly
known as the reserve price.
Withdrawal
Failure
to reach the reserve price or insufficient bidding.