Auction Contracts, Disclosures, and Consumer Protection
The auction contract
Every auction rests on two contracts: the listing/consignment agreement between seller and auctioneer, and the contract of sale between seller and buyer formed at the fall of the hammer. Know the essential terms of a listing agreement: parties, property description, commission, reserve/absolute designation, buyer's premium, sale date, settlement timeline, and authority to advertise. Understand exclusive right to sell versus exclusive agency versus open listing.
Required disclosures
Candidates must know disclosure obligations: agency disclosure, the seller's property disclosure duties, and clear disclosure of buyer's premium, reserve status, and any conditions of sale. Understand material facts that must be disclosed (defects, liens, encumbrances, known title issues). Know as-is sale language and the limits of disclaimers.
Consumer protection
Know Deceptive Trade Practices Act (DTPA) exposure for misrepresentation, and the auctioneer's duty of honest advertising. Understand terms of sale announcements made at the start of the auction - they bind bidders. Know the Statute of Frauds requirement that certain real property contracts be in writing.
Traps
Question traps: advertising an auction as absolute while the listing agreement contains a reserve (misrepresentation); omitting the buyer's premium from advertising; failing to disclose a known defect. Also watch for confusion between seller's disclosure and auctioneer's disclosure.
Rule of thumb
Anything that changes what the buyer pays or what the buyer gets must be disclosed before bidding.
Worked example: Listing agreement states "absolute," but seller later adds a reserve - the auctioneer must correct the advertising or the auction is not absolute; proceeding as advertised creates DTPA exposure.