Reasonably advantageous auction terms

By

Mike Brandly
20 July 2017 - 2:38pm

rhetorical question was recently posed asking if auctioneers can use ‘reasonably advantageous’ terms and conditions (in their contract with a seller, and between the bidders and the auctioneer?) The answer presented was, “yes.” I certainly concur, depending upon your — or the — definition of “reasonable.”

I stay at many hotels throughout the year (although I have never stayed at the Black Bear Hotel in Allentown, Pennsylvania.) In doing so, the hotel and their representatives often require I acknowledge I will not smoke on the property, identify any vehicle (if any) I am driving, provide a credit or debit card for incidentals and sign an agreement to otherwise take reasonable care of the hotel room I’m about to rent.

One might say that in this example, the hotel and their representatives are acting reasonable (being ethical, honest and partaking in fair dealing.) Likewise, an auctioneer could have certain bidder registration requirements or terms and conditions in the contract with his seller — so long as they are reasonable and even favoring the auctioneer or seller.

However, my great uncle who smoked and never had any sort of credit card would not have been able to stay at this hotel. Did he ever secure a hotel room during his many travels? He sure did, but what was reasonable in the 1950s and 1960s isn’t as reasonable today. The standard for what is considered ‘reasonable’ continues to change over time.

I still recall a longtime buyer remarking at one of our auctions years ago that our new policy of accepting absentee bids was “not reasonable.” He informed me he shouldn’t have to bid against people who were “not here at the auction.” How long has it been since we’ve had that discussion with an auction attendee? We’ve never had that discussion again. What was "reasonable" changed in the minds of our bidders, and bidders around the country.

Black’s Law Dictionary (ISBN 0-314-15199-0, 2nd Reprint — 2007, 8th Edition, Bryan A. Garner, Editor in Chief) defines "reasonable" as: adj. 1. Fair, proper, or moderate under the circumstances. 2. According to reason. 3. (Of a person) having the faculty of reason <a reasonable person would have looked both ways before crossing the street>. 4. Archaic. Human <criminal homicide is traditionally called the unlawful killing of a “reasonable person”>. — reasonableness, n.

Virtually any dictionary defines "advantageous" as involving or creating favorable circumstances with synonyms including: beneficial, superior, dominant, good, fortunate, favorable, useful, profitable, fruitful, convenient and expedient. In other words, it appears "reasonably advantageous" could be expressed as “fair, proper or moderate … beneficial, superior, dominant or favorable” terms. This is how hotels today feel to me — they are in a superior position and their terms benefit them, but they are reasonable given the circumstances. If they are not reasonable (fair, proper) I would of course endeavor to find other housing — and I have.

This is the take-home for auctioneers. You can make your proposed seller contract terms and conditions and your proposed bidder terms and conditions reasonably advantageous (for you and your seller) and likely have success. However, make your seller or bidder terms and conditions unreasonable, unfair and/or highly one-sided and you probably won’t. As well, just with the hotel policies I frequently encounter: know that the public, rather than you, ultimately decides what is reasonable.

A seller who considers your auction contract terms and conditions unreasonable won’t sign; a bidder who considers your registration terms and conditions unreasonable won’t register. You can think your terms and conditions are reasonable, but know the public has choices — they can hire another auctioneer, and they can participate in other auctions. Additionally, they can sell their assets in other venues, and buy assets from any number of other sources.

The auction industry is changing. When I first entered the auction industry my plan was to offer better service and benefits than the other auctioneers in my market. An auctioneer entering (or operating within) the auction industry today has other competitors. Sellers today have any number of online do-it-yourself ways to sell their property and bidders/buyers can find virtually anything online and maybe have it dropped at their front door 24 hours later — even with a money-back guarantee.

In response to more competition, is it time to make our terms and conditions more auctioneer favorable? More one-sided? It might be a good time to see if we can make our terms and conditions more seller favorable and more bidder favorable to entice more sellers and more bidders to utilize our services. What’s that saying … you can catch more flies [clients/customers] with honey than with vinegar?

Court cases have always interested me and paramount for auctioneers to understand; yet no court case is as powerful as the court of public opinion — essentially the marketplace. Of the thousands of auctions that take place every day in the United States, no court case is involved, and no court case is telling bidders/buyers or sellers how to feel or react. As we’ve discussed before, perception is far more important than reality:https://mikebrandlyauctioneer.wordpress.com/2017/03/15/every-auction-lawsuit-perception-vs-reality/

If you want more evidence that perception matters, here’s one of any number of articles on the Internet dealing with warnings, cautions, detriments and the like about auctions from 2011 by Robert Mayo on the “10 Myths of Real Estate Auctions” … which of course exhibits that there are 10 (or more) myths concerning real — and likely personal — property auctions which need addressed or explained. Why does such a list exist? Because people tend to think there are obstacles and possibly drawbacks to buying (and maybe selling) at auction. A perception problem? Looks like one to me.

Auctioneers need to assess if the reasonable person (see aforementioned Black’s Law Dictionary reference as defined in part as: a person who acts sensibly, does things without serious delay, and takes proper but not excessive precautions) will sign that contract and/or attend your auction — and even if people do sign your contract, and do attend your auction, how many more would sign/attend if you made the environment more inviting? Yet, despite this definition, maybe Supreme Court Justice Potter Stewart would have offered that ‘reasonable’ is something that’s difficult to define, but “he would know it when he sees it?”

As well, maybe a quick analysis any auctioneer could perform would be to ask if you would sign your own contract as a seller? Would you register to bid at your own auction? I’ve asked auctioneers that question, and I tend to get a wry smile as a response; I would offer that if your answer is anything but, “Sure I would,” then it’s time to take a second look at those terms and conditions. If you would hesitate to sign/register, how are your potential clients/customers viewing these same possible relationships?

If this “Would you sign your own contract?” exercise is mute in your mind, consider this analogy: An auctioneer I were talking about this at lunch the other day, where he introduced me to his niece who works as a bar tender and server. When she came over to our table, I asked her, “I suppose you get a discount when you eat here?” She smiled and whispered to us, “I don’t ever eat here … “Somehow when the employees eat somewhere else made me wonder how good the food really was.

Finally, as we’ve alluded (and hear almost every day from disgruntled sellers, buyers and their attorneys,) the word “reasonable” is a word that is ultimately hard to interpret, but we can observe behavior and get a good idea what it means in the [auction] marketplace.


* Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, AuctioneerRES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.