An Explanation of Auction Types
An auction is the process of selling goods by offering them at a starting price, taking bids and then selling to the highest bidder. Derived from the Latin word augeō, the word "auction" means "I increase" and dates back to as early as 500BC. Following military victory during the Roman Empire, soldiers would often auction off the spoils of battle with sale proceeds going toward the war effort.
The most common form of sale buy auction is an ascending price auction, where potential buyers bid against each other until bidding is either exhausted or time runs out. Conversely, a dutch auction works in reverse, with a high starting price being set and the price lowered until a buyer is willing to accept the offered amount.
Auctioneers often conduct live auctions, scanning the crowd for bidders & announcing prices. It is common for an auctioneer to have an assistant to ensure that bidders in the audience are not missed.
So what are the most common types of auction;
Live (or Ballroom) Auction
A live auction is commonly referred to as an onsite auction and is usually conducted on premises such as a related property, sale yard or auction-house. If items are not available to be inspected, often pictures and descriptions will be displayed when the bidding process commences. An auctioneer stands before the audience of bidders (who are usually required to pre-register their intent to bid) and calls for bids on items being sold. This is a very transparent form of auction where bidders can observe the behavior of others and openly compete to purchase. Live auctions usually achieve the highest selling price in a 'fair market value' environment for buyers.
An online auction platform allows for bidders to compete on a particular item by submitting their bids by computer or mobile device over the Internet. Online auctions provide flexibility and convenience that rivals any other sales platform. Specific timelines for opening and closing dates are usually set for auctions on the internet. Bidders all see the same information which is updated throughout the auction duration. Fixed bid increments are normal, with some online platforms allowing proxy bids, which are used to set a buyers' predetermined highest bid.
Sealed Bid Auction
Sealed Bid, or Silent Auctions are often used to for privacy, where a buyer submits their bid on a piece of paper. On completion of the auction, the highest bidder wins and pays their nominated price for the item. This type of sale is common at charity events.
- Appraisal - A formal assessment
- Auction House - A company that runs auctions
- Auctioneer - A qualified person who conducts auctions by accepting bids and declaring goods sold
- Bidding - A confirmed offer amount to purchase an item for sale by auction
- Buyers Premium - A service fee payable to the auction house by the buyer (typically a percentage of the winning bid amount)
- Commission - A fee paid by a consignor or seller to the auction house for facilitating a sale (typically a percentage of the sale amount)
- Consignor - The owner (or their representative) of an item to be auctioned, who holds title until sold by an auction-house
- Increment - A minimum amount by which new bids must exceed previous bid amounts. This varies depending on type and price of auction
- Lot - Either a single item or group of items being sold
- No Reserve Auction - An absolute auction, where there is no minimum acceptable price and the seller must honor a sale to the highest bid
- Reserve Price - A minimum acceptable sale price; set by the seller prior to auction, which may or may not be disclosed to bidders