Take a look at many advertisements for auctions, and you’re bound to see the words “absolute” or “reserve” making their way into the text.
Have a conversation about auctions with an auctioneer, and chances are you’ll hear the words at some point. The two words are part of auction jargon, part of the lexicon of language that surrounds the auction industry.
“Auctioneers use the words “absolute” and “reserve” to describe an auction and how it will be conducted,” said John Roebuck, CAI, AARE, president of John Roebuck and Associates, Memphis, TN. “Calling an auction “absolute” or “reserve” tells bidders what the auction rules are, so to speak.”
- An absolute auction is one in which the property is sold to the highest qualified bidder with no limiting conditions or amounts. The seller may not bid personally or through an agent. Absolute auctions can also be called auctions without reserve.
Say, for instance, that a piece of real estate – a home – is being sold at absolute auction. The qualified bidder who makes the highest bid during the auction will purchase the home.
- A reserve auction, or an auction with reserve, is an auction in which the seller or the seller’s agent reserves the right to accept or reject any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or reject any bid within a specified time.
Say, for instance, a seller has a boat being offered at a reserve auction. The seller can decide, based on the bids, to sell the boat or to reject to sell the boat for the amount offered during the auction.
Both are valid forms of auctions; the two simply are different ways of conducting the auction on the client’s behalf. Unless stated otherwise, an auction is presumed to be with reserves.
Courtesy of the National Auctioneers Association