Auctions and Bidding Wars
Special to PalmInfocenter.com
An auction is a public sale of items or property where potential buyers place bids for a chance to be the new owner of the assets on sale. At the end of the process, the highest bidder will own the item by paying their bid amount. The main incentive of auctions is the belief on both the buyers? and sellers? end that they will get a better deal as compared to other purchase methods.
Depending on the type of auction you attend, it could be like playing on a gaming platform such as the GGBet Casino, where a stroke of luck will determine what you get in return for placing bids. Similarly, just like casino gaming, auctions could take place physically or via a live online platform, the same way there are brick-and-mortar casinos and live casino sites. All in all, there are four main types of auctions that are widely known across the board. So, let?s take a closer look at what they are all about:
Live and Online Auctions
Live auctions are a type of auction where items or properties are auctioned in the presence of bidders, and they get to physically see the items on sale as they place bids. An auctioneer will call conduct the auction, and all you have to do is raise your arm with your bid number if you?re comfortable with the amount that has been called out.
The other side of the spectrum is online auctions, where you make bids via your device, and the auction is timed, usually for a couple of days before declaring the winning bid. Sometimes, a time is set to preview the assets on sale before the auction starts, but in other cases, you bid on an item that you haven?t had the chance to inspect. Finally, there are cases where instead of the online auction being timed, it?s made live, hence combining the two and expediting the whole process.
Open and Closed Auctions
The other two types of auctions, which may be conducted online or live, are open and closed auctions. In open auctions, the bidders are all aware of competing bids and are mostly carried out in the case of low-cost goods such as household items or livestock.
Closed auctions do not disclose what competing bidders have put forward and are common for high-cost goods or services such as a company or property. Some closed bids have escalation clauses that give the seller a clue as to how much the willing buyer is ready to spend, which saves a lot of time and back and forth.
There are times when the asset in question, say a house is in high demand because of a shortage in the industry or there is an increase in its desirability due to the location. This situation gives the seller the power to set prices and is known as a seller?s market. It usually leads to a bidding war where interested buyers compete to have their offers accepted by the seller. Sellers would typically create a sense of urgency through different ways in a bid to hasten the process for, in some instances, avoid a bidding war altogether by taking the first offer that is on the same level as the asking price or higher.
One thing to keep in mind is that in bidding wars, the highest bid is not necessarily the one that will win the war. Factors beyond just the pricing may drive the seller to reconsider a lesser offer than the highest-priced one. This is one of the main reasons you will find that most bidding wars are closed, and the buyers have no idea what other bidders are offering. The bid can be categorized as ?with reserve,? in which case the owner can refuse the offers on the table or ?without reserve? where the highest bid is the default winner.
How Bidding Wars Work
An example of a bidding war for ownership of a property may go something like this: Property X, an eighteenth-century mansion, has been put on the market, and the owner is welcoming bids with the asking price listed at $400,000. Bob and Britney are both interested in the property, and while Bob offers the exact amount listed, Britney tops this with $50,000 more.
Since it?s a closed bid, the competitors are unaware of what the other party has offered. In the process of wanting to approve Britney as the winning bid on the grounds that she has the highest bid, the owner, who has a sentimental attachment to the house, finds out that Britney plans to demolish the property and create a more modern version of a mansion.
On the other hand, Bob is a history fanatic and plans to maintain the mansion as is, to preserve the history of the win. If the bid is a reserve bid, the owner has the right to refuse the highest bid and sell the property to the party that they think will meet their personal interests. Bob wins the bid; the seller receives the initially intended amount and has peace of mind knowing that the property is in the right hands.
When setting out for an auction, it?s vital to have some information about what will go down depending on what kind of auction you are opting into and the asset value. This will keep you from making hasty decisions when time seems to be running or and from delaying your offer only to have it scooped right from under you. Whether you are bidding on art pieces, houses or livestock, managing your expectations beforehand will save you time and even money.