Re: Auction Question - How Do They Work? - Posted by Dave T
Posted by Dave T on June 03, 2006 at 23:03:25:
The house is being put up for auction by whoever holds title. The auction company is selling on behalf of the title holder.
If the title holder has a minimum price – called a reserve – then the property will only be sold if someone bids higher than the reserve price. It is not up to the auction company to accept any reasonable offer.
At auctions I have attended, the auction price starts low, as low as $2500. The low starting price allows more attendees to participate and drive up the bid. The auction company is hoping that a couple of participants will catch auction fever and start a bidding war.
If the last bid does not go higher than the reserve price, the auctioneer may announce that the reserve has not been met. The title holder may choose to enter negotiations with the high bidder at that point, may choose to close the auction, or may choose to reopen the auction to see if the bidding progresses higher. The auction company will just follow their client’s instructions.
If there is no reserve price, then the auction is called an absolute auction. Often the auctioneer will announce that the auction is absolute. In an absolute auction the high bidder wins, no matter how low that price may be.