Frequently Asked Questions
Q: What are the basic benefits of auctions?
A: The auction method of marketing exposes property to a large number of pre-qualified prospects and creates competition among buyers – at times exceeding the price of a negotiated sale. The auction process creates an atmosphere of excitement and competition
Q: Are auctions just for foreclosures?
A: No. Auctions can occur for a variety of reasons.
Q: What’s happening to traditional auctions with the advent of the online market?
A: Traditional auctions are dwindling due to the convenience, profitability, and broader audience range provided by online auctions.
Q: I want to go to an auction, what should I know before I bid?
A: Understand the type of auction you are participating in (absolute, reserve, industrial auctions, etc.) and make sure to review the complete terms and conditions of the sale. You will want to arrive early to register for the auction. Certain auctions (i.e. real estate) may require a cashier’s check or other payment in advance of the auction to qualify you to bid in the auction.
If you are attending an auction with a live element, you will want to bid in sync with the chant. You should be listening closely and following the increasing bids. Remember: The number the auctioneer is repeating is where the bid is and what the auctioneer is now accepting. During the auction be sure to; Pay attention, Remember your bidder number and keep your paddle with you at all times, Evaluate the condition of the object you want to buy ahead of time, Decide BEFORE the item goes on the block how much you are willing to pay, and Use eye contact to indicate that you are interested in bidding.
Q: What Is the difference between liquidation sale and auction sale?
A: A liquidation sale is the process of selling the assets of a business in an orderly fashion over a longer period of time to achieve higher values that are closer to market value. Whereas auctions are often the opposite of liquidation sales, in that they take place very quickly from start to finish.
Q: Can I attend an auction and participate as a spectator and not bid?
A: Yes, we would encourage people to explore the auction by attending one as a spectator. There is no better way to learn about auctions than to watch one live.
Q: What should I do if I have an issue with an auctioneer or auction company?
A: If the Auctioneer is a member of the National Auctioneer Association (NAA) you may a file a complaint in writing and submit it to the NAA Chief Executive Officer. For legal and financial recourse, you will need to file a complaint within the state where the auction company is located and/or where the auction was held. For states that require an auction license, the licensing board is the first place to start. For all states, we recommend contacting the consumer protection division of the attorney general’s office as well as local city, county and Better Business Bureau offices.
Q: Who’s the person yelling in the audience at an auction?
A: The person you see and hear working amongst the crowd of bidders is known as a ringman. This individual is part of the auction team and is an extension of the auctioneer. The job of the ringman is to convey bids back to the auctioneer from the crowd. When bids are received in the crowd, the ringman will yelp to signal the auctioneer that they have received a bid and to increase the bid amount. These individuals are also there to help answer questions you may have while the auction is being conducted.
Q: What is the auctioneer saying?
A: The art of perfecting the auctioneer’s cry take years of practice, but understanding what auctioneers are saying is simple. The auctioneer’s bid call can be broken into two parts:
Statement (The Current Bid) – I have five dollars.
Question (The Next Bid) – Would you bid 10?
Example: I have 5 dollars, would you bid 10, would you bid 10? Now 10, I have 10 dollars, would you bid 15…
The cadence and repetition of words and use of “filler words” vary from one auctioneer to another, but the format is usually the same. Always remember that the number the auctioneer keeps repeating is the dollar amount they are wanting.
Q: If I scratch my nose or wave at a friend, will the auctioneer think I’m bidding?
A: We hear this misconception a lot! In fact, to bid at an auction or for your bid to be received by the auctioneer, you typically need a bid paddle or bid card. You will receive this bid paddle or card at registration and it will have a number on it. This number allows the auction company to know who is bidding from the list of registered bidders. If you mistakenly bid or the auctioneer misinterprets your movement as a bid, immediately notify either the auctioneer or their staff.
Q: Am I required to have cash on hand at the auction?
A: It is important that prospective bidders read all documents regarding the sale prior to auction day. Cash payment is commonly not required at auctions. Auction companies may accept multiple forms of payment: cash, check or credit card. When attending real estate auctions, auction companies may at times require a specific down payment on-site in the form of a cashier’s check to qualify as a bidder.
Q: Are auctions only for distressed or discounted property?
A: This is a major misconception about auctions. The fact is auctions are the primary sales method when selling valuable assets such as vintage vehicles, multi-million dollar homes and priceless pieces of art. The competitive bidding of an auction and the bidding of prospective bidders sets the price and market value of an asset. The item will not sell for more than the highest bid and will not sell for less than the high bid. You, the consumer, and other bidders determine the market value of an item when you buy at auction.
Q: What are the differences between an absolute and reserve auction?
A: Absolute Auction: An “absolute auction” is an auction where the property is sold to the highest bidder. There is not a minimum or reserve price that must be met to complete the auction sale.
Reserve Auction: A “reserve” auction means that a price has been set between the seller and the auctioneer that must be met to complete the sale. Reserves are often used to provide the seller with security that they receive a certain amount of money to meet their sale goal.
Q: What is a Buyer’s Premium?
A: A buyer’s premium is commonly used in auctions today as a form of payment for the auction company conducting the auction. The buyer’s premium is an advertised percentage of the high bid or flat fee added onto the high bid to determine the total contract price to be paid by the buyer.
Q: What does “As Is, Where Is” mean?
A: One of the most common statements made at auction, “as is, where is,” simply means the property is being sold without warranty and that there are no contingencies based on the status of the asset being sold. It is important that you inspect all auction properties before you bid, both real estate and personal property. Photos may not show all the details or potential faults with the asset and it is your job as a well-informed bidder to thoroughly inspect and know what you are bidding on BEFORE the start of the auction. Once you bid and buy an asset at auction, you are the new owner.
Auction Buyers FAQ
Q: How do I buy at an auction?
A: First, register with the auction company. Once registered you will be given a paddle with a bidder number. If at any point during the auction you would like to place a bid on an item simply lift your paddle in the air and make sure the auctioneer or ringman sees you.
Q: What to do at an auction: step-by-step?
A: Step 1: Inspect the items or property prior to bidding.
Step 2: Get there early. This enables you to get a good position and helps you see the auctioneer and the auctioneer see you.
Step 3: Pre-register and get a bidding number.
Step 4: Be clear when making bids. Call out, put your hand up, flash your bidding card, etc.
Step 5: Have transportation ready or be prepared to pay for delivery.
Q: Can I inspect the property I’m interested in bidding on before the auction?
A: We encourage you to view the property before auction day. Due diligence on the part of the bidder is important with auctions. Contact the auction company managing the auction and inquire about times when open houses will take place, as well as any paperwork available on the property. Auctioneers want you to feel comfortable on auction day. Always feel free to call and ask questions.
Q: What is a minimum bid?
A: Minimum bids are routinely used at auctions to provide prospective buyers with an initial price range of where bidding will begin. If an auction has a “minimum bid” of $50,000, prospective bidders will know that the auction will start with an opening bid of $50,000 and that the asset will not sell for anything less than $50,000. Often times, auctions are advertised with an “opening bid”, but this should not be confused with a “minimum bid.” An “opening bid” simply means a price where the bidding opens.
Auction Sellers FAQ
Q: When is the best time to sell real estate at auction?
A: While Saturday remains the most popular day for auctions, new data shows early morning auctions achieve a higher clearance rate than those held later in the day.
Q: What if it goes too low?
A: If it is an absolute auction and there was no reserve on the item, then legally it must be sold or bought back.
Q: What if nobody shows up for the auction?
A: If absolutely no one shows up or registers for the auction, then all items will be passed on and no sales will occur.
Q: How do you attain true market value?
A: The risk in a private sale is in setting a price. If the price is set too high, the market will not respond. In many cases the property won’t even get an offer. If too low, someone will buy the property and the seller will never know how much was left on the table. The only way for the buyer and seller to know for certain if they will either respectively pay or attain true market value is for the entire marketplace to decide through a competitive bidding process with no artificial restraints. The final price may be higher or lower than anticipated, but if conducted properly, auctions will attain true market value for the buyer and the seller.
Q: What are the pros and cons of a multi property auction?
A: Some auction firms work under the philosophy that multi-property auctions are wonderful for selling a lot of different properties in a short period of time for much less expense. The owners of the properties usually pay a much smaller advertising budget up front since the advertisements usually involve all the properties together. The auction usually is conducted in one spot utilizing a slide projector to show the properties on a screen when they are sold. There are a lot of properties sold very fast with relatively little expense.
Other auction firms concentrate on attaining market value. This process takes longer since only one property is sold on a given day at the subject property site with usually all the advertisement in that particular market focused only on that property. Since the auction firm is concentrating on that one auction in this type of sale, there is time to personally solicit the market in addition to the auction advertisements. The advertisement cost is higher, and the time is longer, but the results are usually much different.
Q: What advertising expenses are there with auctions?
A: Some of the advertising expenses associated with auctions include 4 color flyers; newspaper advertising and trade publications; direct mailing to specific groups; signage, internet and all Social Media; radio and cable TV; MLS if using a Realtor; telemarketing; and press releases.
Q: If I want to hire an auctioneer, where do I start my search and what should I know?
A: If you are considering an auction for your personal or business assets, consider the following tips:
- Whether it be real estate, art or automobiles, select an NAA Auction Professional with expertise in your particular type of sale. NAA Auction Professionals are at the top of their field in the auction business. Members are professionals well versed in the psychology of selling. Their education, commitment to the NAA Code of Ethics, expertise and networking capabilities stimulate competition among bidders, securing you the highest prices for your assets.
Schneider Industries is an NAA Auction Professional | Contact us!
- Ask for references, attend one of their auctions and learn about auctions firsthand.
- Take an active role in the marketing and advertising of your assets.
- Make sure to fully review all contracts, terms and conditions of the auction with a legal expert.