An Auctioneer’s Guide to Understanding Reserve and Absolute silent auction

• Auctions with Reserve: These Auctions allow consignors to sell with a Minimum Selling Price, which is sometimes called a Reserve Price. If the bidding does not reach the minimum or reserve price, the item will not sell and the consignor retains title to it.

• Auctions without Reserve: More commonly silent auction donation called “Absolute Auctions”, these are Auctions without a minimum or reserve price. In Absolute Auctions the highest bidder is the winning bidder, regardless of the final selling price, and title to the merchandise is transferred when the Auctioneer says “Sold”, whether the consignor is happy with the selling price or not.

Considering that the Uniform Commercial Code states that all Auctions shall be considered “With Reserve” unless stated otherwise, why in the world would anyone want to risk their merchandise selling at Absolute Auction when they could protect themselves with a reserve? We hear this question all the time, and quite frankly consider it to be the #1 obstacle to people consigning to Public Auction.

Believe it or not, there is a very good answer to this question, and it is predicated upon the very premise that makes the Auction process work. You need to understand that regardless of who the Auctioneer is, where the Auction is taking place, or what the merchandise is, the primary reason bidders go to an Auction is in the pursuit of a bargain. If they wanted to pay retail price, they could go to a retail store and buy something off the shelf. But the fact is, people go to Auctions looking for bargains. And if prospective bidders knew that everything in an Auction was being sold with a reserve, they wouldn’t bother going to that Auction. And without bidders, you don’t have an Auction. It’s as simple as that.

Most Auctioneers use Absolute Auction in order to attract the greatest number of prospective bidders to an Auction. And once the bidders are at the Auction, let the bidding begin. The more bidders who attend an Auction, generally the higher the prices, because of the heightened bidding competition.

This contrasts with a Reserve Auction, where the item for sale may not be sold if the final bid is not high enough to satisfy the seller. Although a Reserve Auction may generally be considered safer by the seller than an Absolute Auction, Reserve Auctions generally result in a lower final price due primarily to the decreased bidding competition.

This doesn’t mean that Auctioneers never use reserves. They do. Rather it means that reserves are generally implemented only for certain types of merchandise, and only in certain situations. Many Auctioneers will be willing to accept a reserve on a high value item, where the consignor’s potential risk could be great. In these instances, many Auctioneers will accept what they perceive as a “Reasonable Reserve”, with “reasonable” generally meaning that even with the reserve, that item will most likely sell to the highest bidder. However, you should understand that if you and the Auctioneer agree to a reserve price, and if that reserve price is not met, you may have to pay the Auctioneer a commission based upon that reserve price. This is called a “Buy-In” fee.