All Forum Posts by: Myers Jackson

An absolute auction is a type of auction where the property or item is sold to the highest qualified bidder without any limiting conditions or minimum price requirements. In other words, once the bidding starts, the item is guaranteed to sell regardless of the final bid amount.

This format is also known as an “auction without reserve.” Unlike other auction styles, the seller cannot place bids personally or through an agent to influence the outcome.

Key Features of an Absolute Auction

1. No Reserve Price – The property is sold no matter what the final price is.

2. Highest Bid Wins – The top bidder secures the property, ensuring a transparent process.

3. No Seller Bidding Allowed – The seller cannot interfere by bidding or assigning a representative to bid.

Why Choose an Absolute Auction?

• Quick Sale: The property is guaranteed to sell, eliminating uncertainty.

• Competitive Bidding: Buyers know the item will be sold, which often encourages more active participation.

• Transparency: With no reserve, the process is straightforward and builds trust among bidders.

When Are Absolute Auctions Used?

Absolute auctions are common in situations such as:

• Estate liquidations

• Business closures

• Foreclosures or court-ordered sales

• Sellers seeking a fast and definite sale

Final Thoughts

An absolute auction benefits both sellers and buyers sellers achieve a guaranteed sale, while buyers can compete openly, knowing the property will go to the highest bidder. This auction method creates excitement, urgency, and a fair playing field.

A letter that may be required at some auctions to show you are approved for a certain amount. The bank letter of credit guarantees the bank will pay the amount of money required. The bank letter of credit is a powerful instrument when it comes to guaranteed payment.

The dominant strategy is to bid your true value—exactly what the object is worth to you. Figure out what an appropriate market value or what a price you as the buyer is willing to pay. Gain help from a Real Estate Agent, an Agent can use their expertise to do a Comparable Market Analysis. In turn, the buyer and the Agent can make a determination within reason of other similar properties based on location and other reasonable factors. The internet makes it easier than in the past decades. Each county appraiser makes an assessment each year.

When purchasing property at auction, the winning bid is only part of the total cost. Buyers should understand that the final payment often includes several additional fees that can significantly affect the total amount owed. Knowing how these costs are calculated helps avoid surprises at closing.

Starting Point: The Bid Price

The bid price sometimes referred to as the “hammer price” is the amount the auctioneer announces as the winning offer. This figure forms the foundation for calculating the final payment. However, it does not represent the complete cost to the buyer.

Buyer’s Premium

In many auctions, a buyer’s premium is added to the winning bid. This is a percentage fee paid by the buyer to the auction company as part of the transaction. For example, if the buyer’s premium is 10% and the winning bid is $200,000, an additional $20,000 would be added to the total due.

The buyer’s premium should be clearly stated in the auction terms before bidding begins. It’s important for bidders to factor this cost into their bidding strategy to ensure they stay within budget.

Auctioneer’s Fee

An may also be included, separate from the buyer’s premium. In some cases, this fee is incorporated into the buyer’s premium; in others, it is charged independently. The fee compensates the auctioneer for conducting the sale and can vary depending on the auction’s scope, location, and terms.

Additional Fees

Beyond the bid price, buyer’s premium, and auctioneer’s fee, other charges may apply:

1. Closing Costs – These can include title search, recording fees, and escrow charges.
   
   
2. Transfer Fees – Costs related to transferring ownership of the property from the seller to the buyer.
   
   
3. Documentation Fees – Charges for preparing and processing legal documents.
   
   
4. Attorney Fees – If legal services are required for reviewing contracts or resolving title issues, attorney fees may be part of the final amount due.
   
   

These expenses vary depending on the property type, location, and specific requirements of the transaction.

How the Final Payment Is Reported

Typically, the auctioneer reports the bid amount and any applicable buyer’s premium or auctioneer’s fee at the moment the winning bid is awarded. The additional costs such as closing, transfer, and attorney fees are then outlined in the closing documents prepared by the title company or closing agent.

This ensures that the buyer has a complete breakdown of the total payment due before the closing date.

Conclusion

The final payment at an auction is more than just the winning bid. It includes the bid price, buyer’s premium, auctioneer’s fee, and other associated costs like closing, transfer, documentation, and legal fees. Understanding these elements before bidding helps buyers make informed decisions and prevents unexpected costs after the auction ends.

Many buyers assume sellers will always take the highest offer, but that’s not always the case. Sellers carefully consider not just the price, but also the terms that come with the offer. For example, if a buyer offers well above the asking price but only puts down 5%, the seller may reject it if the property doesn’t appraise for that higher amount. This is because financing could fall through if the appraisal is low, putting the deal at risk.

On the other hand, an offer that finances the purchase “like cash” with 20% to 25% down and non-refundable terms can be more appealing, even if the price is slightly lower. Sellers value these types of offers because they are more secure and less likely to fall apart. In fact, sellers often choose offers with better terms, such as larger down payments, quicker closings, or non-contingent agreements. These terms reduce uncertainty and make the sale process smoother.

Sellers may also prioritize offers with fewer contingencies or ones that don’t require them to fix issues. This reduces delays and headaches during closing.

In short, the best offer isn’t always the highest bid. It’s the offer with strong financial terms and reliable conditions that give the seller confidence. Buyers should understand this and structure their bids accordingly to improve their chances of winning, especially in competitive auction environments.

if you had a customer or if you were buying a property at auction...what would be the first thing you would want to know?