She migrated to Australia and, just like thousands of immigrants, one of her first goals was to buy her own home. Ning saw an apartment advertised in the Eastern Sydney suburb of Kensington. Although it was in an old building, it seemed to suit Ning perfectly.
As a single woman, this little apartment was all she needed. But there was no mention of the price. So she rang the agent and asked how it all worked. Just go to your bank and get a bank cheque for ten percent of the amount that you want to pay for the property. The agent assured her that everything was fine.
Ning then registered to bid and waited, nervously, for the auction to begin. The auctioneer waffled for what seemed like half an hour — as auctioneers often do — and he then asked the crowd of people gathered in front of him for an opening bid. Ning raised her hand. In short, it requires a negotiation. A number of factors—the universe of potential buyers, the nature of the asset, your own profile as the process setter, and the effects of openness—determine whether you should conduct an auction or a negotiation.
Not all transactions require collaboration between the buyer and the seller, however. In many instances, an auction is still a better approach than a negotiation. The trick is in knowing which process to use when. To make that choice, you need to clearly understand your potential buyers, the characteristics of the asset in question, your own priorities, and the relative importance of speed and transparency to obtaining the best price. The more possible buyers you have, the more likely you are to get a high price in an auction.
After about 15 bidders, the value that each potential buyer adds drops to almost nothing. In the absence of any particular advantage, each additional bidder has a smaller and smaller chance of being the highest bidder who wins or the second-highest bidder who sets the price. And those are the only two bidders you care about in the end. After about 15 bidders, auction theory estimates, the value of having an extra bidder becomes negligible—as long as the bidders are similarly situated.
You might think that as long as the expected price keeps rising, you want as many bidders as possible to show up.
In many contexts, sellers consider the magic number of bidders to be somewhere between five and eight. When UK-based private equity powerhouse Apax Partners put Xerium Technologies on the block in , it immediately winnowed 40 indications of interest down to seven bidders, on the basis of their reputation, credibility, and likelihood to close the deal. What happens if nobody else shows up? In that case, you would have been better off talking to the buyers directly.
In this scenario, search costs are high, so you should hold an auction, announce it to the world, and let the high-value buyers find you. Are you sure the buyers you want will come to your auction? They may worry that other bidders will get a free ride on their expertise. But if such knowledge does matter, you may have to negotiate privately with the experts or at least hold a sealed-bid auction in order to bring them to the table.
Auction theory predicts that the final price in an auction will be the second-highest valuation plus a little bit more. This will be a pretty good deal for the seller if the top two valuations are close, because the winning bidder will come in almost at his or her price limit. But if the top two valuations are far apart, then the seller will leave money on the table by holding an auction.
If the top two valuations are far apart, the seller will leave money on the table by holding an auction. Such reliance makes financing difficult—and in the investment-heavy telecommunications business, access to financing is critical.
So CWA was valuable to Savvis in a way that was unique among the seven bidders present at the auction. The second-highest bidder, Gores Technology, was a well-known private equity firm. Unlike Savvis, Gores had no synergies with existing operations, no fixed costs that it could leverage across a larger customer base, and no benefits to realize from customer diversification.
CWA was a relative bargain, because Savvis had to beat the Gores bid by only a little bit. When choosing between an auction and a negotiation, buyers should take into account three aspects of the asset they intend to purchase: whether they can create precise specifications for it, the potential for value creation, and whether service or relationships are an important element of the deal.
All else being equal, the more specific you can be about what you want to buy, the more likely it is that an auction will be your best approach. The ability to provide detailed specifications for an asset is sometimes, though not always, determined by whether it is a commodity. To begin with, many product specs cannot be determined in isolation from price. When the U. The Treasury Department would specify a class of security and then banks would compete to sell assets that fit that specification to the government.
Real Estate. Our weekly auctions are Personal Property auctions. Briggs Auction, Inc. Telephone Bid: Bidding in real time over the telephone during the auction if you are unable to attend the auction in person. Toggle navigation. Where does all the stuff come from? The Auction Action How is stuff sold? Are there any guarantees?
Can I just buy things like at a store? Everything is sold by bidding during the auction. Can I bring stuff in to sell? Well then, how do I bid? I won! State Sec. Svoboda , Neb. Thus, auctioneers face substantial liability as to the sales and must take appropriate steps to assure themselves of title to the asset being sold.
Conducting auctions is a legitimate business that cannot be prohibited directly or indirectly. The selling of merchandise at auction and the occupation of auctioneer are legitimate, lawful, and useful. However, the right to sell at auction is not absolute but may be withheld unless reasonable regulations are complied with. Countryman , Iowa Iowa The source of the authority to regulate auctions is the police power and a regulatory statute adopted by virtue of the police power. Gilbert v.
Mathews , Kan. Jones v. Jackson , Tenn. But note that in Perry Trading Co. Tallahassee , Fla. The auctioneer is a public agent, who is employed to sell goods at public venue.
He is not only the exclusive agent to sell, but the law makes him the exclusive agent to collect the amount of the sales. In order to protect the private citizens, who are compelled to trust a public agent, an auctioneer may be required to give a bond for performance of his duties. Lea v. Yard , 4 U. Other reasonable restrictions may be applied by the local authorities. In Hall of Distributors, Inc.
Bowers , F. Ohio , the court upheld the law that the auctioneer must have been a resident of the municipality for one year to protect the owner of the goods as well as the purchaser from fraud and misrepresentation. In Lea v. State laws regulate auctions by providing license to bona fide dealers. Each state has discretionary powers to impose regulations in auctions for general welfare of public.
Administrative officers are provided discretionary power for granting licenses to auctioneers. The officials can refuse license if the character and qualifications of a person are not satisfactory. They can refuse license if public interest requires refusal of license.
The state licensing board can revoke license of persons if they do not meet the standards of honesty, truthfulness, integrity, and competence imposed]. When a licensee violates the terms of the license, the license can be revoked. If the authorities receive complaint of defrauding clients, also, license can be revoked. Commonwealth, Pennsylvania Liquor Control Bd. Venesky, Pa. Even if a license is granted, it can be revoked when it is disclosed that the licensee has committed an act that would justify denial of license.
The licensee should also be provided a chance for hearing. Estate of Breeden v. Gelfond, 87 P. The refusal and revoking of license is subject to judicial review. Courts can determine whether the actions of the authorities were against laws established in the states. However, judicial review of revoking a license is normally limited to:. Wiggins v. Chicago, 68 Ill. State Bd.
There is no federal law regulating auctions in the U. States have created laws regulating auction industry. Most of the states have created special statutes and ordinances governing jewelry auctions.
Reasonable regulations are made by states to regulate jewelry auctions because the sale of jewelry at auctions provides opportunity for fraudulent imposition of jewels over the public. Some laws have restricted jewelry auctions to certain daytime hours. Such laws are considered valid because when certain jewels are valued in artificial lights there is a great risk of fraud.
Quality and value of jewels are determined accurately under daylight than under artificial light]. This helps in preventing abuse and fraud. However, there are limits to restrictions that are considered reasonable. The law will be proclaimed void as it unreasonably interferes with legitimate work of an individual People v. Gibbs, Mich. Generally, sale of jewelry is not a dangerous business and need not be prevented.
States are supposed to provide laws only to prevent fraudulent transactions in jewelry auctions, and not to prohibit legitimate sale. The exercise of police power by states is to promote general welfare.
Laws created to prohibit jewelry auction will be invalid because it tends to close down legitimate business. However, states can make laws that are constitutionally valid. A state law can hold that it is unlawful to sell jewelry at an auction, but can permit bona fide dealers to sell the articles under certain conditions imposed. Such a law will be valid because it does not amount to denial of equal protection of law. Hirsch v. San Francisco, Cal. The owner of the property has the right to control the sale until its conclusion.
The legal definition of an auction is a public sale of property to the highest bidder. The underlying purpose of an auction sale is to obtain the best financial returns for the owner of the property and to allow free and fair competition among bidders. Therefore, any agreement restricting the opportunity to freely bid is against public policy and is void.
Love v. Basque Cartel , F. An auctioneer is free to conduct the sale in any manner chosen, in order to bar fraudulent bidders and to earn the confidence of honest purchasers.
It is optional with the owner to give advertisement before the sale but it is only a declaration of intention to hold an auction at which bids will be received. The terms and conditions of sale must be included in an advertisement of the auction.
However, the auctioneer can modify the terms of sale advertised in a catalog at any time during the sale, if announced publicly and the bidders present are cognizant of it.
Sale of chattels must be made by public auction and those who attend the sale must be given an opportunity to examine and inspect the chattels. Public auction of chattels is not possible if the thing to be sold is bulk. Manhattan Taxi Service Corp. Checker Cab Mfg. Hefton , 38 Kan. Duncan, S. The conditions announced at auction are binding on the bidder. Generally, any person is qualified to become a bidder. Acceptance of a bid is denoted by the fall of a hammer, or by any other audible or visible means signifying to a bidder that the bidder is entitled to property on paying the amount of a bid according to the terms of a sale.
Christenson , N. Generally, a sale by auction comes within the provisions of the statute of frauds and thus a sale of land at an auction is within the statute to the same extent as any other sale or contract of sale relating to land. Scheetz v. Aho, Ohio App. Similarly, an auction sale made by a trustee is within the statute and differs from a judicial sale made by an equity court.
A memorandum can be signed by an agent of a party as if the party had signed personally. The same third person may be the agent of both parties to sign a memorandum and an auctioneer has irrevocable power to sign for both buyer and seller.
The memorandum of an auctioneer must refer with reasonable certainty to the particular individual sought to be charged and the auctioneer acts as the mutual agent of both parties for drawing up and signing the memorandum of sale Freeman v. Poole , 37 R. The memorandum of an auction sale must contain everything necessary to show the contract between the vendor and the purchaser.
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