The auction process can be complicated and daunting to most people. To help make you feel more comfortable in our auction setting, here are a list of auction terms that are regularly used at auctions!
Words and Phrases You May Hear At Auction:
- Absentee bid – A bid placed with the auctioneer or an auctioneer’s assistant in advance of the auction. Usually offered at the auctioneer’s discretion to allow a bidder to participate without being present. An alternative to online bidding.
- Absolute auction – An auction where the property is sold to the highest qualified bidder without the seller’s opportunity to reject the bid. An absolute auction is established by the auctioneer at the time the bidding is opened. Sometimes called an auction without reserve.
- “As-Is” – Selling a property in its current condition without any warranties or representations as to its condition or fitness for a certain use. Buyers are responsible for any examinations they feel necessary for their protection, but understand that the seller is not going to make any changes to the property.
- Bid – An offer to buy at a certain price. A buyer’s premium is often added to a winning high bid to determine the final contract price.
- Bid Assistant (Ringman) – An auction staff member stationed in the audience to assist bidders and the auctioneer as they communicate throughout the auction.
- Bid calling – The verbal process used by the auctioneer to conduct the auction. Using a unique chant the auctioneer acknowledges bids and asks for increments in the bidding.
- Bidder number – A unique number assigned a bidder at registration, used for identifying the bidder throughout the auction process.
- Buyer’s Premium or Buyer’s Fee – A percentage of the high bid, added to that bid to determine the final contract (purchase) price. For example a high bid of $100,000 with a 10% Buyer’s Premium would result in a contract price of $110,000.
- Caravan auction – An auction event in which multiple properties will be marketed together, but sold individually on-site at staggered times.
- Chant – The rapid talking of the auctioneer made up of words and sounds, used to acknowledge bids, ask for increments, and communicate with Bid Assistants.
- Closing – The time at which final funds are exchanged and the property changes hands. Usually handled by a title company as proscribed in the Purchase Contract and occurring several weeks following the auction. The closing process is essentially the same for an auction sale as for any other traditional real estate transaction.
- Commission – The amount paid to licensed real estate agents and auctioneers who have participated in the sale according to published terms and agreements. Typically covered by the Buyer’s Premium.
- Conditions of sale – The terms governing the auction process and sale. Usually published in advance of the sale and announced by the auctioneer prior to opening the bidding.
- Contingency-free or non-contingent – The requirement that a bid on the property not have any conditions attached (such as contingencies for financing or inspections). A non-contingent bid/offer cannot obligate the seller beyond the published terms of the auction.
- Contract – The legally binding document signed by Seller and Buyer at the conclusion of the sale. The contract stipulates the responsibilities of each party.
- Contract price – The sum of the high bid and the Buyer’s Premium. This is the amount entered on the contract as the purchase price. For example a high bid of $100,000 with a 10% Buyer’s Premium would result in a contract price of $110,000.
- Deposit or Earnest Money Deposit – A portion of the contract price paid by the buyer at the time of contact signing. The auction terms will state the deposit requirement. Deposits are credited toward the contract price and are usually non-refundable.
- Escrow – A legal arrangement in which the title company holds the deposit while preparing documents and making arrangements for the closing.
- Gallery auction – An auction event in which multiple properties will be marketed together but sold individually from a central location such as a ballroom or meeting facility.
- Minimum bid – Often used interchangeably with “reserve” and referring to the minimum bid which will be acceptable to the seller. Not usually disclosed. Bidding may begin below the minimum bid and the seller may accept a high bid that falls below his or her established minimum.
- Multi-property auction – An auction event in which a number of properties, owned by one or more sellers, will be offered individually, though advertised together. The event may be structured as either a gallery auction or a caravan auction.
- Multi-parcel auction (“MultiPar”) – An auction method used when a property can be purchased in parts (eg: tracts or units) or as a whole. Bidding is offered on each part, combinations of parts, and the whole property. Bidders have the ultimate flexibility in what they want to buy as the auction concludes only when bidding subsides on all possible combinations. Whichever combinations produced the highest bid (or group of bids) will be the way the property is declared sold.
- Online or Internet bidder – A prospective buyer who is participating in the auction through an online bidding platform. For some auctions the online bidding may be offered for a period of weeks while in other cases it may only be offered simultaneously with the live auction. In the second scenario, the online bidder is competing in real time with bidders attending the live auction in person.
- Opening bid – The first bid offered at an auction. Usually not stipulated by the auction terms.
- Property Information Package (PIP) – A booklet or package prepared by the auction company to assist prospective buyers in evaluating the property. A typical PIP might contain preliminary title commitment, plats or surveys, disclosures, warranty information, auction terms & conditions, a sample purchase contract or other helpful documents.
- Reserve, Seller’s Reserve, or Reserve Auction – The reserve is the minimum bid a seller has stated that he or she will accept at the auction. Usually not disclosed. If the high bid falls above the reserve, the auctioneer has the authority to declare the property sold. If the high bid falls below the reserve, the seller reserves the right to accept or reject it.
- Sealed bid – In a sealed bid auction, all bids are submitted to the auctioneer in writing to be opened at a predetermined deadline. Sealed bids typically must meet certain published criteria to be considered. The sealed bid method may also be used as a precursor to a live auction to qualify bidders for participation in successive rounds of live bidding.
- Terms & Conditions – Rules of the auction that govern how the property is to be offered, how the bidding will be handled, and how the ultimate purchase will take place. Bidders must read and agree to the terms & conditions of the auction in order to register and receive a bidder’s number for participating in the auction.
- “Yep!” – The exuberant sound a bid assistant or ringman utters to notify the auctioneer of a new bid.
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