To help make you feel more comfortable in our auction setting, here is a list of auction terms that are regularly used at auctions.
If you have questions or would like to speak to an auction specialist directly regarding buying or selling your property at Cates Auction, we invite you to give us or a call at 816-781-1134 so we can learn more about how we can best serve you.
GLOSSARY OF AUCTION TERMINOLOGY
If you’re considering auctioning a property, you might have several questions, from how it benefits you and buyers to the terminology used at the auction itself.
At Cate’s Auction Real Estate Company, our relationship-focused agents aim to ensure you know what to expect at a property auction, so you can sell your property confidently and quickly. We’ve answered some common questions we’ve received about how property auctions work below.
What Is a Property Auction?
An auction is an accelerated method of selling a home or real estate property via an open-cry, competitive bidding process. Auctions attract buyers who have pre-qualified for financing and are ready to buy. Auctions also create healthy competition among buyers, so you are likely to receive an excellent price for the property.
Why Auction a House Instead of Sell It?
Auctions are excellent for individuals who wish to sell a property at fair market value quickly. An auction eliminates the expenses of long-term carrying costs and the time-consuming need for open houses and private showings. An auction also ensures a robust marketing campaign that improves buyer interest in the property.
What Are Some Words and Phrases You May Hear at an Auction:
Now that you know the benefits of an auction, you might be wondering — what are some typical auction words and phrases you might hear on the lot?
We’ve put together an auction terminology glossary so you know what’s going on at all times. Read on to discover several common auction terms and learn about their meanings.
- Accredited Auctioneer of Real Estate (AARE) – The professional designation awarded by the National Auctioneers Association Education Institute to qualified real estate auctioneers who meet the educational and experiential requirements of the Institute and who adhere to a strict code of ethics and standards of practice. In order to be designated with the AARE, auctioneer-scholars are required to complete 32 classroom hours, a detailed written auction summary report, proof of at least 10 real estate auctions, and 24 hours of continuing education every three years.
- Absentee Bid – A bid placed with the auctioneer or an auctioneer’s assistant in advance of the auction. Usually offered at the auctioneer’s discretion to allow a bidder to participate without being present. An alternative to online bidding.
- Absolute Auction – An auction where the property is sold to the highest qualified bidder without the seller’s opportunity to reject the bid. The auctioneer establishes an absolute auction at the time the bidding is opened. Sometimes called an auction without reserve.
- Appraisal – An opinion of value provided by a certified appraiser. A bidder who wants an appraisal may hire a certified appraiser who can then schedule access to the property. Because all properties are sold “as is” and without contingencies, the existence or acquisition of an appraisal has no bearing on the sale.
- Auction Marketing Management (AMM) A professional designation awarded by the National Auctioneers Association Education Institute to help professional auctioneers understand today’s marketing, both technology-based and traditional. To attain the AMM designation, auctioneer-scholars are required to complete 24 classroom hours, complete a custom auction summary report based on knowledge from the designation course, and 24 hours of continuing education every three years.
- “As-Is” – Selling a property in its current condition without any warranties or representations as to its condition or fitness for a certain use. Buyers are responsible for any examinations they feel necessary for their protection, but understand that the seller is not going to make any changes to the property.
- Auctioneer – The licensed individual overseeing the auction sale. It is recommended that sellers and buyers only work with auctioneers who are also accredited and are members of the National Auctioneers Association. In the case of a real estate sale, the auctioneer should also be a licensed broker or Realtor and member of the local, state, and national real estate associations.
- Auction Listing Agreement – The contract signed between the auction company and the owner/seller. The Auction Contract lists the duties, responsibilities, expectations, and obligations of both parties, as well as providing protections for both. For real estate auctions, the Auction Listing Agreement is typically an exclusive right to sell.
- Auction Marketing – The process whereby the public is notified of the auction buying opportunity. Because realized prices are achieved through competitive bidding, auction marketing must be compelling, thorough, accurate, and expertly disseminated in order to attract the largest possible pool of buyers. The ability of the auction company to effectively market the auction is critical to the outcome.
- Backup Bidder – The bidder with the second highest bid. In those rare instances where the high bidder fails to complete the transaction (forfeiting payment), the backup bidder may have an opportunity to make a purchase.
- Bid – An offer to buy at a certain price. A buyer’s premium is often added to a winning high bid to determine the final contract price.
- Bid Assistant (Ringman) – An auction staff member stationed in the audience to assist bidders and the auctioneer as they communicate throughout the auction.
- Bid Calling – The verbal process used by the auctioneer to conduct the auction. Using a unique chant the auctioneer acknowledges bids and asks for increments in the bidding.
- Bid Catcher – A bid catcher is the auctioneer’s assistant and is commonly referred to as the “ringman.” This person works the lot alongside the auctioneer, communicating bids to them verbally or with hand signals.
- Bid Increments – The minimum amount of increase determined by the auctioneer to be required to place the next and subsequent bids. This is announced by the auctioneer in a live auction and prompted by the bidding platform in an onsite auction. Bid increments may change during the course of bidding based on bidding activity, bid levels, or other criteria at the discretion of the auctioneer.
- Bidder Number – A unique number assigned to a bidder at registration, used for identifying the bidder throughout the auction process.
- Broker Participation – Usually refers to the involvement of a licensed real estate agent or broker who is representing a prospective bidder. The broker for a buyer’s agent who properly registers with the auction company is due the advertised commission sharing arrangement if his or her bidder prevails in the auction and closes on the property. Individual auction terms & conditions provide additional details. (Agents/brokers are often involved in referring real estate for auction as well.)
- Bought-In – A lot is considered “bought-in” when there are no lot bids or bidders have not offered the seller’s reserve price and the lot remains unsold.
- Buyer’s Premium or Buyer’s Fee – A percentage of the high bid, added to that bid to determine the final contract (purchase) price. For example a high bid of $100,000 with a 10% Buyer’s Premium would result in a contract price of $110,000.
- Certified Auctioneers Institute (CAI) – The Certified Auctioneers Institute is the professional designation awarded by the National Auctioneers Association (NAA) to practicing auctioneers who meet the experiential, educational and ethical standards set by the NAA Education Institute. In order to be granted the CAI designation, auctioneer scholars must have been practicing full-time auctioneers for at least two year (prior to attending the institute), attend all three years of CAI with more than 120 classroom hours, complete all special projects and complete 24 hours of continuing education every three years.
- Caravan Auction – An auction event in which multiple properties will be marketed together, but sold individually on-site at staggered times.
- Cataloging – The process of putting auction items into groups or lots, writing descriptions of each lot, and supplying corresponding photographs. The end result is the catalogue bidders will use to peruse items available for bidding in the auction.
- Certified Estate Specialist (CES) – The Certified Estate Specialist is a professional designation awarded by the National Auctioneers Association Education Institute to help professional auctioneers understand how to properly conduct and deal with the settling of estates. The course also educates professional auctioneers on working with family members and dealing with lawyers and accountants. In order to be designated with the CES, auctioneer-scholars are required to complete 21 classroom hours and complete 24 hours of continuing education every three years.
- Chant – The rapid talking of the auctioneer made up of words and sounds, used to acknowledge bids, ask for increments, and communicate with Bid Assistants.
- Closing – The time at which final funds are exchanged and the property changes hands. Usually handled by a title company as proscribed in the Purchase Contract and occurring several weeks following the auction. The closing process is essentially the same for an auction sale as for any other traditional real estate transaction.
- Commission – The amount paid to licensed real estate agents and auctioneers who have participated in the sale according to published terms and agreements. Typically covered by the Buyer’s Premium.
- Conditions of Sale – The terms governing the auction process and sale. Usually published in advance of the sale and announced by the auctioneer prior to opening the bidding.
- Contingency-Free or Non-Contingent – The requirement that a bid on the property not have any conditions attached (such as contingencies for financing or inspections). A non-contingent bid/offer cannot obligate the seller beyond the published terms of the auction.
- Contract – A contract is a legally binding document signed by Seller and Buyer at the conclusion of the sale. The contract stipulates the responsibilities of each party.
- Contract Price – The sum of the high bid and the Buyer’s Premium. This is the amount entered on the contract as the purchase price. For example a high bid of $100,000 with a 10% Buyer’s Premium would result in a contract price of $110,000.
- Deposit or Earnest Money Deposit – A portion of the contract price paid by the buyer at the time of contact signing. The auction terms will state the deposit requirement. Deposits are credited toward the contract price and are usually non-refundable.
- Designation – Designations are proof that the person had completed additional specialized training from an accredited source such as the National Association of Realtors and the National Auctioneers Association. Designations typically have continuing education requirements to remain current.
- Escrow – A legal arrangement in which the title company holds the deposit while preparing documents and making arrangements for the closing.
- Estate Auction – Items in an estate, including real estate, are being sold via competitive bidding at auction. This is different from an estate sale in which personal property is displayed with price tags for purchase over a multi-day period and unsold items are donated or otherwise disposed of.
- Gallery Auction – An auction event in which multiple properties will be marketed together but sold individually from a central location such as a ballroom or meeting facility.
- Fair Market Value – The price at which seller and buyer agree to exchange property. Fair market value is driven by buyers’ willingness to purchase, not be sellers’ expectations.
- Fair Warning – Typically issued just prior to the close of live or onsite bidding.
- Go on the Block – If a property “goes on the block,” this means that it has gone up for auction or is on the auctioneer’s block.
- Lot – One or more items offered for bidding. A lot could be a piece of real estate, and item in an estate, or a group of items being sold together.
- Listing Broker – The licensed real estate professional (broker or agent) who has the exclusive right to market a piece of real estate for sale. In the case of a real estate auction, the auctioneer is typically the listing broker, though in some instances there is a partnership established with an outside listing broker, with a clear legal delineation of duties and responsibilities.
- Minimum Bid – Often used interchangeably with “reserve” and referring to the minimum bid which will be acceptable to the seller. Not usually disclosed. Bidding may begin below the minimum bid and the seller may accept a high bid that falls below his or her established minimum.
- Multi-Property Auction – An auction event in which a number of properties, owned by one or more sellers, will be offered individually, though advertised together. The event may be structured as either a gallery auction or a caravan auction.
- Multi-Parcel Auction (“MultiPar”) – An auction method used when a property can be purchased in parts (eg: tracts or units) or as a whole. Bidding is offered on each part, combinations of parts, and the whole property. Bidders have the ultimate flexibility in what they want to buy as the auction concludes only when bidding subsides on all possible combinations. Whichever combinations produced the highest bid (or group of bids) will be the way the property is declared sold.
- National Auctioneers Association (NAA) – Founded in 1949, the NAA is the world’s largest professional association serving the auction profession. The association is dedicated to providing its professional members with educational programming and resources to help them advance themselves and, in turn, the industry. Members of the NAA abide by a strict Code of Ethics and are connected with an extensive network of auction professionals.
- No Reserve Auction – The seller has not established a minimum bid requirement or “reserve” on the auction.
- No-Sale Fee – The amount (percentage or flat rate) stipulated in the auction contract that the seller will pay the auction company if the property does not sell in the auction. Sometimes called a “pass fee.”
- Online or Internet Bidder – A prospective buyer who is participating in the auction through an online bidding platform. For some auctions the online bidding may be offered for a period of weeks while in other cases it may only be offered simultaneously with the live auction. In the second scenario, the online bidder is competing in real time with bidders attending the live auction in person.
- Onsite Auction – An auction in which bidders can participate live at a prescribed date, time, and location. Often an onsite auction may also allow for simultaneous live online bidding.
- Onsite Bidder – During a live auction, the bidders who have chosen to come to the auction location to participate in bidding.
- Opening Bid – The preset level required for the first bid. Generally, this is simply the base bid increment. In higher valued properties the auctioneer may elect to set a higher opening bid. If the seller’s reserve is published, that value is generally also used as an opening bid. (If the reserve is not published, the opening bid should not be construed to be the reserve.)
- Preview – An opportunity for prospective bidders to view the property prior to the close of bidding.
- Property Information Package (PIP) – A booklet or package prepared by the auction company to assist prospective buyers in evaluating the property. A typical PIP might contain preliminary title commitment, plats or surveys, disclosures, warranty information, auction terms & conditions, a sample purchase contract or other helpful documents.
- Referring Broker – A licensed broker or real estate agent may refer a seller/property to the auction company and earn a percentage of the commission on the sale.
- Reserve, Seller’s Reserve, or Reserve Auction – The reserve is the minimum bid a seller has stated that he or she will accept at the auction. Usually not disclosed. If the high bid falls above the reserve, the auctioneer has the authority to declare the property sold. If the high bid falls below the reserve, the seller reserves the right to accept or reject it.
- Reserve Price – A reserve price is the maximum price a bidder is willing to pay for a property and the minimum price that a seller is willing or able to accept from a buyer.
- Sealed Bid – In a sealed bid auction, all bids are submitted to the auctioneer in writing to be opened at a predetermined deadline. Sealed bids typically must meet certain published criteria to be considered. The sealed bid method may also be used as a precursor to a live auction to qualify bidders for participation in successive rounds of live bidding.
- Seller’s Commission – Any commission due by the seller is stipulated in the Auction Contract with the auction company.
- Telephone Bidding – An option sometimes offered in a live auction whereby a bidder may pre-register and bid via a telephone connection with the auctioneer or bid assistant.
- Terms & Conditions – Rules of the auction that govern how the property is to be offered, how the bidding will be handled, and how the ultimate purchase will take place. Bidders must read and agree to the terms & conditions of the auction in order to register and receive a bidder’s number for participating in the auction.
- The Block – The block is the auctioneer’s podium.
- Tie Bids – A tie bid occurs when two bidders bid the same amount. Credit for the bid goes to whichever bidder first had the bid on record at online auctions or whoever was recognized by the auctioneer at live auctions. The auction terms and conditions should address tie bid situations.
- “Yep!” – The exuberant sound a bid assistant or ringman utters to notify the auctioneer of a new bid.
Questions? Speak To An Auction Expert Today.
If you’re ready to sell or buy real estate by auction, contact Cate’s Auction Real Estate Company today. We’ve proudly provided expert auction services to the greater Kansas City metro area for over 70 years, and we are happy to hear from you with any questions you might have. Browse our current auction selection, including residential, commercial, land auctions and more.
Or, if you’re considering auctioning your property, complete our free, no-obligation property auction analysis to see if an auction is the right choice for you!