What is an auction?
“Auction” is a common name for several types of sales where the price is neither set nor arrived at by negotiation, but is determined through the process of competitive and open bidding. The two major types of auction are (1) Forward auction: in which several buyers bid for one seller's good(s) and (2) Reverse auction: in which several sellers bid for one buyer's order. An auction is complete (and a binding contract is created) when a bid is accepted by the seller or the buyer (as the case may be).
The benefits for sellers to sell on auction are often overlooked. Auctioning is known as a proven way of turning assets into cash within the quickest possible time. Selling on auction has the benefit that multiple purchasers partake in the bidding process for the same item in an upward trend, opposed to selling out of hand where the seller has to negotiate with one prospective purchaser at a time and where the purchaser is usually bargaining the price down. Selling out of hand takes a lot of time and involvement from the seller and he is exposed to unknown persons who enter his/ her personal space. Auctions on the other hand creates an arm’s length distance for the seller and the selling is concluded in a commercial environment away from the private space of the seller.
If it is fixed property that is sold on auction, the seller has the benefit that there is no suspensive conditions. From the time that the decision is made to sell the property on auction, a transaction can be concluded within four weeks.
Moveable assets can either be auctioned on the site of the seller, for instance agricultural equipment, loose goods and furniture where farming activities were ceased or with the sale of a farm, or for instance the sale of the contents of a house of a deceased estate, owner emigrating, etc.
Smaller quantities of goods from individual sellers could be delivered to the auction house, or arrangements for collection thereof could be made. All goods will be recorded on a seller’s agreement document, also serving the purpose of a goods received note. Reserve prices may be recorded on certain items in liaison with the auctioneer. InCommercial Auction services work on a 15% seller’s fee. Such fee is negotiable on large quantities of high value goods.
Auction House: A Company or other juristic person which from time to time conducts auctions as part of its business.
Auction Without Reserve: An auction at which goods are sold to the highest bidder. There is no reserve, the auctioneer may not take competing bids from the seller or his agent and once the auction is opened, items or lots may not be withdrawn.
Auctioneer: A person who sells by auction; a person whose business it is to dispose of goods or lands by public sale to the highest or best bidder.
Bid: An indication by a bidder of the acceptance of the auctioneers bid call, or an offer by a bidder of a price higher than the bid that the auctioneer has at that stage.
Catalogue: A list of lots on offer at an auction with a description of the items.
Commission Bid: A bid made by a registered bidder on a lot prior to the auction when he is not able to attend the auction.
Lot: Any item or group of goods sold or offered for sale as a unit and identified as such.
One to Take: One item from a lot of similar units is auctioned and sold to the highest bidder. Such bidder then has the choice to take as many units as he wants, after which other registered bidders is offered the remaining units at the bid price.
On Site Auction: Auction which is conducted on the premises of the property.
Off Site Auction: Auction which is not conducted on the premises of the property. (Usually fixed property)
Preview: A specific time before the auction (announced by the auctioneer) when prospective bidders may view and access the lots for sale.
Reserve Price: Minimum price for an item (lot) which a seller has agreed to sell for. Reserve prices must be set prior to the auction.
Roll: Record which is kept during the auction indicating the buyer's numbers and prices against the lot numbers.
Rules: (Conditions) A list of terms by which the auction will be conducted.
Subject to Confirmation (STC): The seller reserves the right to accept or reject an offer to purchase which was established by the highest bid on auction. This usually also applies when a reserve price was not met.
Vendors roll: A comprehensive record of all details of the auction, including advertising, rules, bidders record, list of goods on auction, list of goods withdrawn, successful bidders details, purchases and prices paid and a list of goods not sold.
“Voetstoots”: The seller or the auctioneer offers no warranties on the items or lots sold at the auction.. The Consumer Protection Act describes it as “Duty to repair”. The duty to repair is not by the seller nor by the auctioneer.