Look it up: Common auction terms you should know

The following is a glossary of real estate auction terms developed by the National Association of Realtors, the National Auctioneers Association and the Auction Marketing Institute.

While it is a real estate glossary, most of the terms apply to all types of auctions.

AARE (Accredited Auctioneer, Real Estate) – Professional designation awarded by the Auction Marketing Institute to qualified real estate auctioneers.

Absentee bid – Procedure that allows a bidder to participate in the bidding process without being physically present. Generally, a bidder submits an offer on an item prior to the auction.

Absolute auction – An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. 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.

Appraisal – The act or process of estimating value.

“As Is” – Selling the property without warranties as to the condition and/or the fitness of the property for a particular use. Otherwise known as “As Is, Where Is” and “In its Present Condition.”

Auction listing agreement – A contract executed by the auctioneer and the seller that authorizes the auctioneer to conduct the auction and sets out the terms of the agreement and the rights and responsibilities of each party.

Auction marketer – An individual who contracts with sellers for the auction method of marketing property. In the case of real property, he or she may not actually conduct the sale, but is directly responsible for all aspects of marketing the property.

Auction value – The price that a particular property brings in open competitive bidding at public auction.

Auction with Reserve – An auction in which the seller or his agent reserves the right to accept or decline any and all bids.

A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.

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 acknowledgment – A form executed by the high bidder confirming and acknowledging the bidder’s identify, the bid price and the description of the property. Also known as memorandum.

Bid assistants – Individuals who assist the auctioneer and prospective bidders with information to help them in their buying decision.

Also known as ringmen, bid consultants, bid spotters, or groundsmen.

Bid caller – The person who actually “calls,” “cries or “auctions” the property at an auction, recognizing bidders and acknowledging the highest bidder. Commonly known as the auctioneer.

Bid rigging – The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value.

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

Bidder package – The package of information and instructions pertaining to the property to be sold obtained by prospective bidders at an auction. Sometimes called a bidder packet or due diligence package.

Bidder’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.

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, and so on, until all properties are sold.

Broker participation – An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.

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

Buyer’s premium – An advertised percentage of the high bid or flat fee added to the high bid to determine the total contract price to be paid by the buyer.

Caveat emptor – A Latin term meaning “let the buyer beware.” A legal maxim stating that the buyer takes the risk regarding quality or condition of the property purchased, unless protected by warranty.

Collusion – The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value or when the auctioneer accepts a fictitious bid on behalf of the seller so as to manipulate or inflate the price of the property.

Commission – The fee charged to the seller by the auctioneer for providing services, usually a percentage of the gross selling price of the property established by contract (the listing agreement) prior to the auction.

Conditions of sale – The legal terms that govern the conduct of an auction, including acceptable methods of payment, terms, buyer’s premiums, possession, reserves and any other limiting factors of an auction.

Dual agency – The representation of opposing principals (buyer and seller) at the same time.

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

Estate sale – The sale of property left by a person at his or her death. An estate auction can involve the sale of personal and/or real property.

Hammer price – Price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel.

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.

Minimum bid auction – An auction in which the auctioneer will accept bids at or above a disclosed price. The minimum price is always stated in the brochure and advertisements and is announced at the auctions.

Minimum opening bid – The lowest acceptable amount at which the bidding must commence.

Multi-property auction – A group of properties offered through a common promotional campaign. The properties to be auctioned may be owned by one seller or multiple sellers.

National Auctioneers Association – Association of individual auctioneers united to maintain ethical standards for the auction profession, and promote the enactment of just and reasonable laws, ordinances and regulations affecting auction selling.

No-sale fee – A charge paid by the owner of property offered at a reserve auction when the property does not sell.

Preview – Specified date and time property is available for prospective buyer viewing and audits. Also known as open house or inspection.

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.

Regroup – A process used in real estate auctions where a bidder has the opportunity to combine several parcels of land previously selected by other bidders, thereby creating one larger parcel out of several smaller parcels.

Sale manager – The person designated by the auction company who is responsible for organizing the details of an auction. Also known as project manager.

Sealed bid – A method of sale utilized where confidential bids are submitted to be opened at a predetermined place and time.

Not a true auction in that it does not allow for reaction from the competitive market place.

Tax sale – Public sale of property at auction by governmental authority, due to nonpayment of property taxes.

Terms and conditions – The printed rules of the auction and certain aspects of the purchase and sale agreement that are read and/or distributed to potential bidders prior to an auction sale.

Tie bids – When two or more bidders bid exactly the same amount at the same time and must be resolved by the auctioneer.

Trustee’s sale – A sale at auction by a trustee.

Upset price – Commonly known as the reserve price.

Withdrawal – Failure to reach the reserve price or insufficient bidding.