Negotiating with a "cut" bidder
We no more than published — and talked via the www.fasttalkingpodcast.com — about cut bids (https://mikebrandlyauctioneer.wordpress.com/2017/11/21/as-the-auctioneer-do-you-have-to-take-a-cut-bid/) when we received an inquiry in a case where the defendant auctioneer was asking us if it was legal for him (or any auctioneer) to negotiate with a bidder offering a cut bid in an absolute auction?
In our prior example, we suggested a cut bid was an auctioneer with a current high bid of $5,000 and asking $5,250 with a bidder offering $5,100. Today, we explore if the auctioneer/seller can counter (rejecting the $5,100 offer) and suggest $5,200, for example.
In essence, in a without reserve (absolute) auction the property must be sold to the highest bidder. Therefore, in our example, so long as the property is sold to the bidder offering $5,100 then we’ve satisfied that legal treatise. The question might as well be, can we counter at $5,200 and sell it to this bidder for that amount, assuming no other bids?
It seems obvious that we can sell this property for $5,200 with no other bids, but what if this bidder offers $5,100 and that bid is rejected and countered at a suggested $5,200 bid, and he rejects that “counter-offer” (not really an offer, but rather another suggested offer?) It would appear then the auctioneer would have only two choices at this point assuming no other bids:
§ Sell the property to this bidder for $5,100
§ Find himself in breach of his contract with his seller (for instance if he sells the property for $5,000)
Another subtlety regarding this question is if the $5,100 bidder following a so-called counter-offer (counter-suggestion) of $5,200 rejects the $5,200 proposal and withdraws his $5,100 offer? Of course, assuming no other bids, the high bid at this point would be $5,000 … but there was a higher bid (higher bidder) at $5,100.
Could a seller claim that the property was indeed not sold to the highest bidder? Could a seller maintain that the auctioneer discouraged or prohibited the property from selling for more than the current high bid? Can you guess what this aforesaid litigation regards?
We think the answers to these questions in all cases is “Yes.” Indeed the seller could claim the property wasn’t sold to the highest bidder and the auctioneer discouraged a higher bid; troubling situation to be in for any auctioneer.
Possibly another solution for that auctioneer who in an absolute auction refuses that $5,100 offer would be to bid $5,100 (or some number greater than $5,100) himself in order to sell the property to the highest bidder? I know an auctioneer who claims to have “a barn full of stuff” from his years of conducting auctions … maybe that was his solution?
Finally, even if an auctioneer is sufficiently persuasive and gets a bidder offering $5,100 to up his offer to $5,200, this seems a precarious maneuver where the auctioneer would either have to quickly accept the $5,100 upon the bidder’s refusal to bid $5,200 or be ready to bid himself in order to comply with the mandate that the property sells to the highest bidder. Not necessarily prudent practice for an inexperienced auctioneer.
As I’ve suggested to auction school students — and published as well — absolute auctions are not necessarily a good fit for an inexperienced auctioneer. The value a tenured auctioneer brings to a without reserve (absolute) auction is hard to overvalue and a less-adept auctioneer likely doesn’t know what he doesn’t know.
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, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and Faculty at the Certified Auctioneers Institute held at Indiana University.
The original article and image is available here.
This article has been published with permission from the author.