Important Auction Terminology You Should Know
Bidding at an auction is efficient and rewarding, but some bidders may find the terminology used at auctions to be quite confusing. When it comes to auctions, there are several terms that you should be familiar with so that you can navigate the process more smoothly. Examine the important auction terminology you should know so that you can remain more focused and less confused during your next auction. Whether you’re bidding or selling, knowing these terms is a must.
One of the best ways that a property seller can get a valuable offer for their land is with a reserve price. The reserve price is the minimum amount that the seller is willing to accept for the land being auctioned. If bidding does not reach the reserve price, the property will not be sold. This is an important term to know because it can impact your bidding strategy. However, the reserve price is kept confidential in many cases.
The hammer price is the final bid price for an item when the auctioneer brings the hammer down. This is the price that the winning bidder will pay for the item. It is important to note that the hammer price does not include any additional fees, such as the buyer’s premium.
If you bid on a property and win, the buyer’s premium is an additional fee you must pay. The cost of the premium will vary and be added to your final price. Remember that the buyer’s premium is not included in the hammer price. That said, this premium is frequently calculated using the hammer price. For example, the buyer’s premium for the auction you attend may be 15 percent of the hammer price or greater, depending on what the auction house and seller determine. This goes directly to the auction house, ensuring they receive compensation for their role in the sale. The buyer’s premium is crucial to consider when determining your maximum bid for a piece of land.
This is among the important auction terminology you should know because it expands your bidding opportunities. An absentee bid happens when a bidder works with the auction house to arrange a system for them to put money on a property without them being physically present at the auction. This is a type of bid you can place online, over the phone, or through a written form. If you plan to place an absentee bid, it is important to know the auction house’s policies and deadlines for submitting bids so that you can plan accordingly. At Midwest Land Management, we host online land auctions that make it easy for a wide range of buyers to bid without having to leave their homes. This is convenient for the bidder, and it ensures the seller doesn’t miss out on any bids.
Auction terminology can be confusing, but understanding these key terms will help you navigate the auction process with confidence. Knowing the reserve price, hammer price, buyer’s premium, and absentee bids will allow you to make more informed bids and avoid any surprises when it comes time to pay for your item. If you are a property buyer or seller, you should familiarize yourself with these terms so that you can have a successful auction experience.