Absolute auction

What Is an Absolute Auction?

An absolute auction is a type of auction in which the sale is awarded to the highest bidder. Absolute auctions do not have a reserve price, which sets a minimum required bid for the item to be sold.

An absolute auction is an auction in which the highest bidder receives the item for sale. That is, an absolute auction does not have a specified price below which the current owner will refuse to sell.

A sale will be to the highest bidder, regardless of the amount bid. Common wisdom among auctioneers is that a property advertised as being sold at absolute auction will attract more bidders and higher bidding prices than one advertised with even a low minimum acceptable bid,or reserve price.

How an Absolute Auction Works

There are many different types of auctions. A sealed bid auction, for example, is an auction in which people submit secret bids, while in a Dutch auction, the auctioneer starts at a high price and decreases it until somebody agrees to buy the item for that price.

An absolute auction is the “classic” type of auction where the item—whether real estate or any other type of produce—is sold to the highest bidder, regardless of the price. Since there is no reserve price or minimum floor above which bidding must start, the bidding in an absolute auction starts at $0.

Absolute auctions can occur in various venues, including the foreclosure marketplace, the online marketplace (such as eBay.com), or live auction events. School foundations and charities, for example, often hold absolute auctions to raise money.

Absolute auctions are often implemented where there is an immediate demand to sell an item.

Absolute Auction vs. Lender Confirmation Auction

One type of absolute auction relates to foreclosed properties, where the winning bid acquires the foreclosed property. Although it is highly unlikely, if only one person were to show up at an absolute auction, their bid would be accepted, no matter how low the amount of money being bid.

An absolute auction is different from a lender confirmation auction, in which the lender must approve the bid in order to complete the transaction. In real estate, if a foreclosure is sold at a lender confirmation auction, the highest bidder does not necessarily win. The individual with the winning bid must not only have the money to spend but must also be vetted and accepted by whoever is holding the mortgage, be it a bank or the government.

Auctions with Reserve

In general, every auction is conducted with a reserve unless stated,

“Absolute” or “With Out Reserve” ..Meaning the seller can reserve the right to accept or reject the final bid.

While most of our auctions are sold “Absolute” we do allow for some properties to be sold with reserve for several reasons. Such as If there is a high mortgage or a minimum dollar amount the sellers wish to obtain. Cash Auctions has been in the auction profession for over 40 years, we will only market and sell properties that we know will sell and be successful.

The main disadvantage of a Reserve Auction is that prospective buyers may not invest the time and expense of due diligence when there is no certainty they will be able to buy the property even if they are the highest bidder.

Bidders and Buyers come more prepared when they know the sale is guaranteed. It is easy to assume that a seller would be taking a big risk selling absolute; however, professionally conducted auctions that are professionally marketed and advertised will always achieve fair market value – IF NOT MORE – when sold at absolute auction.