When most people think of an auction, they likely envision a fast-paced, gavel-pounding event where bids are made and the highest bidder wins the item. This is how many property auctions work as well, but there are some key differences that potential buyers should be aware of before participating.
The first thing to understand is that not all auctions are the same. There are two main types of auctions: absolute and reserve. In an absolute auction, the property is sold to the highest bidder regardless of price. With a reserve auction, the seller sets a minimum price that they are willing to accept for the property and if no bid meets or exceeds this amount, the property does not sell.
Before either type of auction begins, bidders must register with the auctioneer and often times will be required to provide proof of funds in order to participate. The registration process ensures that only serious bidders are participating and also allows the auctioneer to keep track of who has bid on what.
Once registered, the bidding will begin. During an absolute auction, bidding typically starts at a low amount and then increases in increments until only one bidder remains. At this point, that bidder wins the property
