Auction Terminology

Abesentee Bid: A procedure, which allows a bidder to participate in the bidding process without being physically present at the auction. Generally, a bidder submits an offer on an item prior to the auction and instructs the auctioneer to a place bid on the absentee bidder’s behalf in the amount of the Absentee Bid. The auctioneer or his representative usually handles absentee bids under an established set of guidelines. The 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 to the auctioneer that is the top price he or she will pay for a given property and instructs the auctioneer to so enter the bid on his or her behalf.

Absolute Auction: An auction where the property is sold to the highest qualified bidder with no limiting conditions as to the bidder or the amount of the high bid. 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.

As Is, Where Is: Selling the property without warranties of any kind or nature including, 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, with all faults" and "In its Present Condition."

Auction: A method of selling real property in a public forum through inviting offers through open and competitive bidding. Also referred to as: public auction or auction sale.

Auctioneer: The person or firm contracted by the seller to direct, conduct, or be responsible for a sale by auction. This person may or may not actually call or cry the auction.

Auction Listing Agreement: A contract executed by the auctioneer and the seller which authorizes the auctioneer to conduct the auction, sets out the terms of the relationship, and identifies the rights and responsibilities of each party.

Auction Marketing Plan: The plan for how the property and auction will be promoted to drive purchase interest.

Auction Value: The price obtained for a particular property from open competitive bidding at public auction. Also known as Market Value.

Auction With Reserve: An auction in which the seller reserves the right to accept or decline the high bid. Also referred to as an auction "Subject to Seller Confirmation."

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 identity, the bid price, the description of the property, and his or her agreement to the terms and conditions governing the auction and sale of the property.

Bidder Number: The number issued to each person who registers at an auction.

Buyer'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 set by the auctioneer. 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 within the group are sold.

Broker Participation: An arrangement for third-party brokers to register a potential bidder for a property being sold at auction to receive a commission paid by the represented bidder or the auction firm upon closing and exchange of the property.

Buyer's Broker: A real estate broker who represents the bidder and, as the agent of the buyer, is normally paid for his/her services by the bidder.

Buyer's Premium: An advertised percentage of the high bid or flat fee paid by the bidder and added to the high bid to determine the total contract price to be paid by the bidder. Also known as a "Buyer’s Fee" in some states.

Carrying Costs: The costs incurred by the owner when holding a vacant or underutilized property (e.g., insurance, taxes, maintenance, management).

Catalog or Brochure: A publication advertising and describing the property available for sale at public auction, often including photographs, property descriptions, and the terms and conditions of the sale.

Clerk: The person employed by the auction firm to record what is sold and to whom and for what price.

Closing: The act of completing the final steps of a real estate transaction, including the funding of the purchase price, payment of closing costs, disbursement of escrow funds, and legal conveyance of the property to the buyer.

Commission: The fee paid to the auctioneer by the seller pursuant to the listing agreement in exchange for providing auction services and is typically expressed as a percentage of the gross selling price of the property.

Conditions of Sale: The legal terms that govern the conduct of an auction and the conveyance of the property, including acceptable methods of payment, closing terms, buyer's premiums, possession, 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. Also known as Terms & Conditions of Auction.

Contract: An agreement between two or more persons or entities that creates or modifies a legal relationship.

Due Diligence: The process of gathering information about the condition and legal status of assets to be sold.

Escrow: The process of holding down payment funds tendered by the high bidder until disbursement of the funds pursuant to written instructions by the bidder and seller. The auctioneer either holds the down payment funds in trust and deposits the funds into a third-party or real estate broker escrow/trust account either immediately upon receipt of the funds or upon acceptance of the high bid by the seller. This process is dictated by the Terms of Sale, the purchase contract, and applicable state law.

High Bid: The last bid offered by a bidder and acknowledged by the auctioneer prior to declaring the auction closed.

Increment: The minimum amount by which the current high bid can be increased as set by the auctioneer.

Listing Agreement: A contract between the seller and the auction house allowing an item to be listed for auction.

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.

Live Auction: This is an auction that takes place in "real time".

Market Value: The open market value of an item. The high bid at an auction represents the market value of the property. Also called Auction Value.

Maximum Bid: The upper bid limit set by the buyer when using proxy or "automatic" bidding.

Minimum Bid: The smallest amount that can be bid by a buyer.

Nominal Opening Bid: It is the bid amount the auctioneer will use to kick off the auction and set the initial bid increments. The auctioneer has the option to start below this bid amount, if desired.

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.

Open Public Inspection: Specified date and time property is available for prospective buyer viewing and audits. Also known as Preview or Open Inspection.

Property Information Package (PIP): A collection of property information documentation and auction instructions prepared by the seller and auction firm for property being sold at an auction and is distributed to prospective bidders prior to the auction. Sometimes called a Due Diligence Package.

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.

Reserve: A price set and agreed upon by the auction company and the seller identifying the minimum high bid amount that will be accepted by the seller.

Ringmen: Individuals who are positioned throughout the auction attendees to assist the auctioneer in spotting bidders and provide prospective bidders with information to help them in their bidding decision.

Seller: Entity that has legal possession or (ownership) of any interests, benefits, or rights inherent to the real or personal property and the legal right to market and convey the property.

Soft Close: If someone places a bid in the last few minutes of an online auction, the end time for the specific lot is extended. The process continues until there are no more bids made within the last minutes or seconds. At that point, that specific lot closes.

Terms and Conditions: 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.

Trustee's Sale: A sale at auction by a trustee.