Different Types of Live Auctions

There are different auction formats that can be used by brick and mortar auction houses. There are some that we have not mentioned here because they are rarely used at personal property auctions or rarely used in this country. We are going to briefly describe the ones that you will most likely come in contact with should you attend a live auction.

Traditional or Standard Auction – This is the most common. It is also referred to as an English auction. Buyers bid on an item in ascending increments until no one else bids. The auctioneer then sells the item to the last high bidder. The traditional auction may or may not have reserves and, if it does, the audience may or may not know about them. A reserve is the price at which a seller/consignor is willing to sell his/her item. In other words, the seller is hedging his/her bets.

Some auction houses will announce a reserve before selling the item and the auctioneer will try to open the item at that amount. If the auctioneer cannot get the reserve as an opening bid, the item is passed. This means there is no sale.

The other way of handling a reserve is for the auctioneer to open the item below the minimum required and to bid against the audience until the minimum is reached. As soon as the minimum is achieved, the auctioneer is out and it will sell to the highest bidder. If the item does not reach the minimum amount, again, it is recorded as a no sale.

Many auction houses will charge a seller a commission on a reserve item that does not sell. It costs an auction house money to advertise and to prepare the item for sale so some payment to the house is expected.

Some auction houses charge a flat amount if a reserve item does not sell. Other houses will charge the same commission percentage as if the item did sell. In this case, the commission percentage would be based on the reserve amount. If the reserve is $200 and the seller’s commission rate is 25% then the seller will pay a commission fee of $50. This can get very expensive so if you consign to an auction house and want to protect your items with reserves you need to find out the reserve policy up front.

There are a few houses that will charge a lower commission percentage on a no sale reserve. Occasionally you might find a house that will not charge anything at all. If a seller consigned a number of quality pieces and only asked for one reserve, then the house may waive the reserve fee as a show of good will.

Absolute Auction – This is also known as a No Reserve Auction. This means that all items in an auction will be sold to the highest bidder regardless of price. An absolute auction can potentially draw bigger crowds because buyers believe they have a better chance of getting a good deal.

Of course the opposite may also be true. Bigger crowds could conceivably drive up the prices. Part of what makes a brick and mortar auction so much fun is that buyers can get caught up in the moment causing some very lively bidding.

Most absolute auctions accept left/absentee bids and phone bids just like in a traditional or standard auction. Until we have a chance to research the regulations in other states, we can only speak for Florida. In Florida, if you advertise an auction as absolute you are bound by law to sell all the merchandise to the highest bidder. There are no reserves allowed.

Should a seller request a reserve be placed on an item at the last minute, and the seller was told upfront that his/her items were going to be sold absolute, then the auction house can refuse to honor the reserve request. If they don’t want to refuse the request then the auction house can choose to remove the item from the sale. It, however, cannot execute a reserve under any circumstances.

Dutch Auction – Unlike a traditional or an absolute auction, you will probably never find an auction that uses Dutch as its theme for an entire sale. This is occasionally used on a few items being sold in a traditional auction format. Rather than the auctioneer accepting ascending bid increments until there are no further bids, in a Dutch auction the auctioneer begins with a higher price and announces descending bid increments until someone bids. The first person to bid gets the item.

Bidders would love to see the increments sink as low as possible but they are afraid to wait too long. They are afraid that someone else will bid before they do and they won’t get the item. This format is fun to watch. In practice, it is not used very much because it does establish a single bid transaction. At our auction house, we would do this on occasion just to shake things up. We never did it with someone else’s items, only our own.

Silent Auction – This auction format is most commonly used in charity auctions where bidding on a number of items is set to end at the exact same time. Bids are written on a sheet of paper that is assigned to each item and when time is up the highest bidder on each sheet of paper wins the bid. There is no auctioneer involved.

Some charities use the absolute auction format with an actual auctioneer. In the state of Florida, anyone can assume the role of auctioneer for a charity auction. No auctioneer license or auction business license is required. However, if the organization having the auction wants to get the most money for the items or services being donated, they may want to consider a professional auctioneer.

We can’t speak for all auctioneers but the majority of them are usually willing to donate their services at no charge for a worthwhile cause. If you are thinking of having a charity auction, check your state laws to see if you are required to use a licensed auctioneer.

Written by Anne Benedetto, Auction House Talk
 All Rights Reserved