Blog Post 3: Glossary of Terms You’ll Hear at an Auction
The auction industry is a world and culture unto itself. Auctions and bidding wars are an ancient form of commerce… and nothing survives that long unless the value is there. If you’ve never been to an auction, it can be quite an experience. The noises, the excitement, the fast pace, the deals, the poker-faces, the competition… it’s quite exhilarating. It’s like a controlled form of gambling where you can truly stack the cards in your favor by having more knowledge than those bidding against you. However, hard-earned knowledge like that is usually only gleaned through years of experience. Perhaps you’re not yet a seasoned veteran of the auction culture… wouldn’t it be helpful to have a glossary of commonly used terms?
Of course it would… so here you go:
The People You’ll Encounter
Auctioneer: Obviously, it’s the person with the microphone, calling the bids and conducting the auction. Most states require the auctioneer to have specific training/schooling, licensure, bonding, and insurance. Some states even require a prospective auctioneer to serve as an apprentice for up to 2 years before they can be licensed. Such strict regulations are an effective way to protect the integrity of the industry and protect the bidders (public).
Ringman: The Ringman/Ringwoman, also known as Bid-Assistants, or Barkers, are the people you’ll see in the crowd, helping the auctioneer see and hear all bidders. The crowd can get quite large, compacted, and huddled around the action. The Ringman is there to help ensure you’re heard by the auctioneer. They also function as a translator between you and the auctioneer. If you’re not accustomed to hearing and following the auctioneer’s fast pace, the Bid-Assistant can help. The Ringman is your conduit to the auctioneer.
Bidder: That’s you… and it’s also many people in the crowd around you. I say many, because not everyone in the crowd is a bidder. Being a bidder means you have registered to bid and have been assigned a unique bidder number. This may be in the form of a card, a paddle, or just a piece of paper with your number written on it. Getting that number means you’ve provided identification, contact information, agreed to the their Terms and Conditions, and perhaps placed a deposit or credit card authorization. It’s usually the same process for online bidding. Keep your bidder number secure, it represents you.
Seller: Usually the seller is a 3rd party that owns the equipment being auctioned. The seller is the one that hired the auctioneer to sell their assets, or consigned their equipment with the auctioneer to be sold at a multi-seller auction. It’s good to know the difference because this can give you clues about what you’re bidding on. Think of yourself as a detective, searching for clues… clues which can help you formulate better strategies, and ultimately get the best deals. Knowing who the seller of an item is, and why they’re selling it can be a handy clue to have.
Clerk: There’s a lot of accounting going on during all the excitement. Bids are placed, lots are sold, totals are calculated, and premiums are tallied. And while all this is going on, it’s also being categorized and stored, according to bidder numbers. This can be done manually, on a computer, over the internet, or any combination thereof; and this is all performed by the auction clerk(s). This is usually the same person(s) that issues you a bidder number, and takes your payment if you buy anything.
Types of Auctions
Online: This is an auction that takes place inside of an online bidding platform. This can be an auctioneer’s website, or through a portal to a secure bidding platform on another website. The secure bidding platform, separate from the auctioneer’s website can be particularly useful to you as a bidder. Some of the most reputable platforms, such as HiBid.com, ProxiBid.com, and BidSpotter.com have hundreds or thousands of auctioneers paying for their services. This means that you, as a bidder, with just one account, can bid in, keep track of, and have access to thousands of auctions and auctioneers online. Plus, these large-scale, multi-auction platforms enable you as a bidder, to do a proximity search, by zip code or city, for specific items, across all auctions on that platform (a huge time-saver!).
Live: This auction takes place live, in-person. It’s the classic auction format, with the auctioneer calling bids while the crowd gathers in a frenzy to buy. It’s a terrific way to liquidate enormous collections of assets, estates, supplies, equipment, vehicles, surplus, or anything you can think of. It’s also the most exciting way to do it. You can’t beat the energy at a well-orchestrated, live auction…. it’s incredible.
Simulcast: Also called Webcast, this is when the auctioneer combines the live auction format with online bidding, through special software or online integration platform. It can be an effective method for reaching the largest amount buyers when auctioning off niche equipment with small local markets.
Absolute: If an auction is advertised or disclosed as “Absolute,” then ALL LOTS in the auction will sell to the highest bidder, regardless of price. If the auctioneer only takes a single bid on a particular lot, and that bid is only $1… then that lot just sold for $1.
Though it’s worth noting that this doesn’t mean the auctioneer must drop the price until someone bids. If the auctioneer determines the price has dropped too low, and no bids have been placed, the auctioneer, at his/her discretion, has the authority to stop the auction and withdraw the lot. This is often referred to as No-Sale, Pass, Passed, or Withdrawn. It’s important to understand this because if you’re waiting for the price to drop, there’s no guarantee the auctioneer won’t stop the auction before the price drops below a certain point. This is why it’s good to follow the auctioneer on other items you may not be interested in, just so you can get a better idea and feel for that particular auctioneer.
But don’t panic… if you miss out on an item because it was withdrawn before any bids were placed, feel free to approach the auctioneer or Bid-Assistant and make an offer. They’re not required to accept your offer, but many times they do.
Reserve: This is when an item being sold at auction has a pre-determined, minimum selling price. The reserve is not usually disclosed to bidders (but it can be, at the seller’s discretion). Though, during the bidding (if live) you may hear it announced during bidding, that an item has reached the reserve and will sell. If an item does not meet the reserve, it is not sold. If you’re the high bidder, and the reserve was not met, don’t be afraid to approach the Auctioneer or Ringman and negotiate a deal. Many times, the seller can be nudged in your direction if you agree to be nudged in theirs a little more.
Silent: Silent auctions are often encountered at benefit auctions but can be used anywhere. Also known as a sealed-bid auction. This is the type of auction where nobody is calling the bids. There will be a bid box in front of each lot up for auction. As a registered bidder, you will fill out a bid slip and place it in a sealed envelope. When the auction concludes, the auctioneer will open the bids, then award that lot to the highest bidder. This is not to be confused with a max bid feature or absentee bid (described next).
Commonly Used Terms
Absentee Bid: Mostly used for live, on-site auctions, absentee bids allow for bidders with scheduling conflicts to place a bid, by proxy. Usually this is done in writing, after signing and agreeing to the terms and conditions of the auction. The bid will specify a maximum amount chosen by the bidder, and the auctioneer will bid on behalf of that bidder, up to that amount. If the auction closes below that amount, the absentee bidder wins the auction item for that lower amount. If the auction exceeds the amount, the absentee bidder loses the bid and the item is awarded to whomever the highest bidder was.
All One Money: When there are multiple items in a particular lot, and the lot will be sold for a single price. So if a particular lot consists of 200 wine glasses, and the closing price is $25… then that entire lot sold as one item… for a total of $25.
By-The-Piece: Also known as “times the money’ or “quantity” (x2, x3, x4, etc.) … this is a bid multiplier, where the high bidder must take all. Let’s say a particular lot consists of 20 folding chairs. If the auctioneer announces that they will be sold “by-the-piece,” and the highest bid was $5, then the total price for that lot will equal $5 per chair, multiplied by 20 chairs… or $100.
Choice: Let’s use the chair scenario again, but this time the auctioneer announces “Choice.” This means when the auction closes, the high bidder will be able to choose which, and how many of the chairs they want. Their winning bid will then be multiplied by the number of chairs they selected. The high bidder can select any number of chairs they want, from 1 to 20, and are usually allowed to quickly cherry-pick which ones they want. If the high bidder doesn’t take all the chairs, the back-up bidders will be offered choice next. If no back-up bidders take the offer, the remaining chairs will be auctioned in a new round of bidding.
As Is: Usually described As-Is/Where-Is, meaning the auctioneer makes no representations as to the condition, quality, or functionality of an item. It could be missing parts, it could be broke, or it could be in perfect working condition. As with any auction, it is incumbent upon the bidder to perform their due diligence and bid accordingly. Additionally, the “where-is” identifier means that lot is sold where it is, and the high bidder is responsible for all labor, expenses, and liability for removing that item. If you’re new to the auction world, this may seem harsh. But many times, this is the only way an auctioneer can ethically sell an item. Think about it… that auctioneer doesn’t own that item, they have no history with that item. And in many cases, the seller doesn’t either. This would be the case in an estate liquidation where the seller is deceased… or a bankruptcy or tax liquidation where the seller is the lien holder. The auctioneer can’t be expected to ethically represent such equipment in any way other than As-Is/Where-Is.
Bidding Increments: Auctioneers move fast, and they need to if you expect hundreds of lots to sell in a single day. One way in which an auctioneer achieves this is by moving in predictable increments that the crowd can follow. How confusing would it be if the bids went as follows: $1… $4… $6.37… $6.41… $7.67… $7.68… $7.69? That makes it difficult to know what the next bid is. This is why auctioneers follow increments that make numerical sense. It makes the bidding easier to follow and predict, thus the bids move along much quicker. However, these increments can and usually do change as the price goes higher. Typical bid calling increments are:
Single Digit: 1, 2, 3, 4, 5, 6, 7, 8, 9
Double Digit Fives: 10, 15, 20, 25, 30, 35, 40, etc.
Double Digit Quarters: 45, 47.50, 50, 52.50, 55, 57.50, 60, 62.50, etc.
Triple Digit Tens: 100, 110, 120, 130, 140, 150, 160, 170, 180, 190, 200, etc.
Triple Digit Quarters: 100, 125, 150, 175, 200, 225, 250, 275, etc.
Triple Digit Halves: 500, 550, 600, 650, 700, 750, 800, etc.
None of this is the rule however; these are just guidelines. And it’s up to the auctioneer to choose the best routes to take; and that will likely include switching back and forth as the bids go higher, and speed up or slow down. You should familiarize yourself with these increments and try to get a feel for the auctioneer’s rhythm. Then you can focus more on your bids, predict the next bid, and be a more effective auction-goer.
Chant: This is everything that comes out of an auctioneer’s mouth during the bidding. It’s their rhythm, their words, their patterns, and their speed. Many auctioneers have a chant that’s unique to them, but all great chants have that unmistakable sound. It’s not music, it’s not singing, it’s not talking, it… well… it auction-speak! And I absolutely love to hear a good one! The chants can differ greatly depending on what kind of auction you’re attending. Art and wine, for instance, are typically much slower paced. Whereas livestock, or car auctions are much faster. This is primarily because those auctions are full of professional bidders/dealers, and multiple hundreds of lots must be sold. Cases like this require speed and efficiency.
Catalog: Also referred to as the Auction Bill, this is a list of all the items in the auction, and is subject to change. It also can contain the Terms and Conditions, or other pertinent details on the auction. The lots in an auction are usually numbered, and those numbers are referenced in the catalog when accounting for closing bids. It’s always a good practice to have a pen and write down your winning bid amounts in the catalog. That way you can keep track of your spending, and address any accounting issues when you settle your invoice. But don’t forget to keep a mental note of any buyer’s premiums, taxes, or other fees that may be added to your invoice, as defined in the Terms and Conditions of that auction.
Hammer: The auctioneer may or may not have an actual hammer, also referred to as a gavel. When you hear the term “hammer-price” it refers to what a lot sold for (not including fees, premiums, and taxes).
Last Call: Although not a requirement, many auctioneers will announce “Last call,” to signal to bidders that the hammer is about to fall (close of bids), giving them fair warning to bid now or lose the item. Other common warnings are “all in,” “all done,” or simply repeating the next requested bid with more verbal emphasis.
Bid Sniping: This is a tactic used in timed and online auctions. It’s when a bidder waits until the very last second to place a bid, hoping that no other bidders will have time to jump in before the timed auction closes (think eBay). Most auctioneers feel this is a terrible experience for all parties involved. Therefore, we usually have an extension feature built into the auction ending, dictating that if a bid is placed within the last moments of an auction, the auction will automatically extend, giving all bidders a short window of time to reassess and bid again if they choose.
Bidder Collusion: This tactic is against the law, and occurs when two or more bidders agree not to bid against each other, or form some other type of agreement in an effort to manipulate outcome of an auction.
Shill: This is also against the law, and occurs when an false bids are placed as a tactic to drive up the selling price of an item at auction.
Tie Bid: This is when two different bidders bid at the same time. If this happens, (and it happens often), the auctioneer will decide how to handle it, and will choose who gets that bid. The bidding will resume, and any bidder that wasn’t chosen will then have the opportunity to place the next higher bid.
Sold: Obviously, it’s when the auctioneer closes bidding, drops the hammer, and announces an item is sold. When this happens, a legally binding agreement is executed between the auctioneer, the seller, and the high bidder. Once the auctioneer declares an items sold, it’s too late for any other bidders to jump in. If a bidder claims they weren’t seen or heard, it doesn’t matter; the deal has closed and a legally binding agreement was verbally executed. When the auctioneer refuses to re-open the auction, he/she isn’t being mean, they’re just following the law.
Title: Some items come with a title, such as vehicles, boats, and trailers. This differs per the regulations of the state an item is titled in, but it also differs per lot. Even though an item is supposed to come with a title, it doesn’t mean an actual title is present, or even available. The auctioneer will make announcements regarding the title, and it may also be announced in the auction bill or catalog. But beware! If a title is described as “attached” it does NOT mean what you think it does. Attached means the title is NOT present at the sale. It may be in transit, it may be in the mail, it may be lost. The best scenario for title is “Title-in-Hand,” which means the title is actually in the auctioneers possession and ready to be signed over.
Terms and Conditions: This is the legal jargon of the auction and should not be overlooked or taken lightly. It describes all expectations, requirements, liabilities, responsibilities, fees, removal details, limitations, and more. When you register for an auction, or agree to sell at auction, you are agreeing to the Terms and Conditions of that auction. If you’re bidding, the Terms and Conditions become a legally binding contract the moment you place a bid… and that contract remains in effect unless/until you are out bid. Be sure you read and understand every word the Terms and Conditions! One more thing about this subject… you also need to listen to the auctioneer’s announcements because there’s usually a disclaimer in the Terms and Conditions that states “Any announcements made by the auctioneer at the time of the sale take precedence over the Terms and Conditions.” So it’s important to pay close attention to all the announcements.
Fees and Monies
Buyer’s Premium: This is a common fee, though not every auction charges one. It’s usually a percentage, that’s added onto the winning bids to help recoup some of the expenses an auctioneer incurs. The premiums vary, so familiarize yourself with it when you read the Terms and Conditions.
Seller’s Commission: This is the fee the auctioneer charges the seller. It can be a flat fee, incremental fee, percentage of sales, or other charge, written into the contract. It’s not cheap to be an auctioneer. We must pay for schooling, continuing education, licensure, bonding, insurance, payroll, site logistics, transportation, equipment, advertising, jurisdictional permitting, security, accounting, software, professional associations, and a ton of other stuff. Furthermore, there are many hours of work going on behind-the-scenes to make sure an auction is successful.
Taxes: This will depend on what state you’re in, and what items are being sold. Some auctions have no sales tax, and some do. Familiarize yourself with the terms and conditions, and all auctioneer announcements at the sale.
Rigging & Removal: Some auctions include lots that (for safety) require trained professionals and specialized equipment to de-install. This fee will usually be charged to the winning bidder, and clearly disclosed in the Terms and Conditions, and sometimes in the auction item description. It’s usually also announced by the auctioneer at the time of sale. Examples can be, but are not limited to:
Crane services to remove roof mounted equipment
Electrician services to disconnect high voltage supply lines
Plumbing services to safely shut off water main, or disconnect lines
Industrial equipment requiring specialized rigging or lifts
Flatbed loading services or logistical transport
Deposit: Many auctioneers may require bidders to place a deposit before being allowed to participate in an auction. This deposit is at the discretion of the auctioneer, and can be in the form of monies held, bank letter of credit, credit card authorization/hold, or other form of consideration, described within the Terms and Conditions of the auction.
Credit Card Processing: Credit card companies charge the auctioneer around 3% to process credit cards of the bidders. Some auctioneers offer bidders a 3% discount on the buyer’s premium if the buyer pays in cash. This discount is at the discretion of the auctioneer, and will be explained in the Terms and Conditions, and/or auctioneer announcements at the time of sale.
I hope this was helpful. It’s not an all-inclusive list of terms, but it should be enough to get you through your first several auctions looking like a pro. Good luck, and happy bidding!
If you’d like more information, or if you have any questions, please don’t hesitate to reach out. I love what I do and enjoy helping any way I can.
Mark Busby - Principal Auctioneer/Founder
BidTender Auctions in Fairfax, VA
www.bidtenderauctions.com
