The ‘Absolute’ Auction That Had a Reserve
Harmony Estate Sales advertised a 300-lot estate auction as “ABSOLUTE - everything sells to the highest bidder, no minimums.” The written contract with the seller, however, said the seller could reject any bid below $80,000 for the real property and could withdraw any lot before the gavel fell. At the auction, the auctioneer announced a 15% buyer’s premium only after the first 50 lots had sold. Online simulcast bidders never received the premium announcement and saw only the word “absolute” in the listing. When a ring sold at $5,000, the auctioneer withdrew the next lot because the bid was “too low.” Two bidders who traveled to the sale demand an explanation.
1. Identify the disclosure and auction-type problems in the advertisement, contract, and conduct of the sale.
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The central problem is that the sale was advertised as absolute while the contract gave the seller a right to reject bids below $80,000 and to withdraw lots. An absolute auction means the property is sold to the highest bidder without a reserve or seller confirmation. If the seller can reject a bid or withdraw a lot because the price is too low, the sale is not absolute and must be conducted and advertised as a reserve auction. The auctioneer cannot use the word “absolute” to attract bidders and then apply a secret reserve.
The buyer’s premium was also mishandled. A 15% premium is a material term that affects the total price; it must be disclosed clearly before bidding begins and in the advertising and online listing. Announcing it after 50 lots sold is too late for those bidders, and the online bidders were never told at all. Withdrawing a lot at $5,000 is consistent with a reserve sale but contradicts the absolute advertising.
2. How should the auctioneer have structured and announced this sale to comply with Ohio auction requirements?
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Before advertising, the auctioneer should have reconciled the contract and the marketing. If the seller wanted an $80,000 minimum on the real property and the right to withdraw lots, the auction should have been advertised as a reserve auction, not absolute. The terms should have stated that the seller may reject bids below a stated reserve or may withdraw lots before the gavel falls.
At the opening of the live sale, and before any online bidding opened, the auctioneer should have announced whether the sale was with reserve or absolute, the amount or nature of any reserve if disclosed, the 15% buyer’s premium, and how the premium would be applied. The same terms should have appeared in the printed ad, the online listing, and the bidder registration materials. If the seller insisted on absolute treatment, the contract would have needed to remove the rejection right and the low-bid withdrawal right.
3. What should Harmony do now to address the two complaining bidders and prevent a repeat?
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Harmony should first preserve the advertising, the seller contract, the online listing, the bid records, and the opening announcements. It should acknowledge the inconsistency rather than deny it: the sale was advertised as absolute but conducted with a reserve and a late-disclosed premium. For the affected bidders, Harmony should review whether any lot was withdrawn or sold under terms that contradicted the advertised absolute status, and it should consult the Division and legal counsel about an appropriate remedy, which may include rescission or adjustment for affected transactions.
Going forward, Harmony should use a checklist that reconciles the seller contract with the advertisement before publication. Every sale should state “absolute” or “with reserve,” the buyer’s premium, and any withdrawal rights in all media. The auctioneer should read those terms before bidding opens, and online bidders should be required to acknowledge them before registering.