Auction

Title
Adebajo Ebun
Adekunle Temi
Adelowo Mofe
Lorem
Adeoye Ifeoluwa
Ajayi Seyi Ipsum
Ekanem Inimfon
Ikpeba Sonia SIT DOLOR AMET
Learning objectives

Meaning of Auction
Types of Auction
Bidding strategies and terminologies
Advantages and disadvantages of Auctioneering
Principles of Auctioneering
Auctioneering as it relates to Real Estate
What is Auction?
The word “auction” is derived form a latin word “augere”, which
means “to increase” or “augment”. An auction is a process of buying
and selling goods or services by offering them up for bid, takings
bids, and then selling the item to the winning bidder. In economic
theory, and auction may refer to any mechanism or sets of trading
rules for exchange.
Types of Auction
There are two (2) types of auction and they are Primary and secondary auction

For primary auction we have;

Dutch Auction

Sealed First-Price Auction

Vickery auction
Secondary type of Auction
All- pay auction

Buyout auction

Combinatorial auction

No reserve auction

Reserve auction

Silent auction

Walrasian auction
 Primary Auction
ENGLISH AUCTION

The English auction is also known as an open ascending price auction. The process involves participants
bidding openly against one another, with each subsequent bid higher than the previous one. An auctioneer
may announce prices, bidders may call out their bids themselves.

Dutch auction

A dutch auction is a type of auction where the auctioneer begins with a high asking price which is lowered
until some participants is willing to accept the auctioneer’s price, or a predetermined reserved price which is
the seller’s minimum acceptable price is reached. The winning participants pays the last announced price.
This is also known as “clock auction” or an “open-outcry”.
Secondary auction
Buyout auction:

Buyout auction is an auction with a set price(the buyout price) that any bidder can accept at any time
during the auction, thereby immediately ending the auction and winning the item. If no bidder chooses to
utilize the buyout option before the end of bidding the highest bidder wins and pays the bid. Buyout option
can either be temporary or permanent.

Combinatorial auction:

Combinatorial auction is any auction for the simultaneous sale of more than one item where bidders can
place bids on an “all-or-nothing” basis on “packages” rather than just individual items. That is, a bidder can
specify that he or she will pay for items A and B, but only if he or she gets both.
Bidding strategies and terminologies
Some of the strategies and terminologies in auctions includes:
Chandeliers bidding

Collusion or knock-out

Suggested opening bid

Auction sniping

Bid shading

Bidding

Common value auction

Chandelier bidding is a practice of raising false bids at crucial times in the bidding process in order to
create the impression of greater demand or extend bidding momentum for a work on offer. To call out the
non-existent bids, auctioneers might fix their gaze at a point in the auction room that is difficult for the
audience to pin down.

Bid shading:

Bid shading describes the practice of a bidder placing a bid that is below what they believe a good is
worth. Bid shading is used for one of two purposes. In a common value auction with incomplete information,
bid shading is used to compensate for the winner’s curse. In such auctions, the goods item is worth the same
amount to all bidders, but bidders do not know the value of the goods and must independently estimate it.
Strategies And Terminologies
Auction sniping:

Auction sniping is the process of watching a timed online auction and placing a winning bid at the last possible moment
(often seconds before the end of the auction), giving the other bidders no time to outbid the sniper. Some bidders do this
manually, and others use software design for the purpose. A bid sniper is a person or software agent who performs auction
sniping.

Collusion and knockout:

Whenever bidders at an auction are aware of the identity of the other bidders there is a risk that they will form a “ring”
and thus manipulate the auction results, a practice known as collusion. By agreeing to the bid only against outsiders but
never against members of the “ring”, competition becomes weaker and final price level is affected.

Knockout is a dishonest scheme by with dealers agree secretly not to bid against each other, so as to buy goods at an
auction for less than their true value.
Advantages of Auctioneering
Sellers at auction can usually be assured that their property will sell on a certain day.

Bidders have a great time

Spectators at auction enjoy an exciting event

Buyers often find rare items

The seller controls the terms of sale.

Convert your assets to cash quickly

On the day of the auction, your solicitor must attend with you. You will need to pay for their time
and associated costs for their attendance.
Selling at auction can deter some buyers because of the competitive nature of the bidding process
– not everyone enjoys that scenario.
Potential bidders must register to attend an auction and this may also put potential purchasers off.

The costs of selling at auction may exceed those of using an estate agent, and you’ll have to pay
the auctioneer’s fees regardless of whether the property is sold or not.
 Principles of auctioneering
The basic principles of auctioneering are:

Where goods are put up for sale by auction in lots, each lots is prima facie deemed to be the subject of a separate contract
of sale.

A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in order
customary manner. Until such announcements is made, any bidder may retract his bid.

A sale by auction may be notified to be subject to a reserved or upset price, and a right to bid may also be reserved
expressly by or on behalf of the seller. Where a right to bid is expressly reserved, but not otherwise, the seller, or anyone
person on his behalf, may bid at the auction.

Where a sale by auction is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the
seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the
seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer.
Auctioneering as it relates to real estate
Auctioneering relates to real estate as properties can be sold through this approach. This
approach works because there is a deadline and so creates urgency. A FOR SALE sign does not
have a time line for potential buyers to submit offers. The deadline or auction date and time mean
that if a buyer has any interest in purchasing your property they must do so at the designated
date, time and place that the sellers choose. The benefits of selling real estate at auction is that the
costs of maintaining real estate, labor costs for maintenance, insurance, debt service, taxes and
time and travel to the property and other expenses related to owning assets will cease at the
completion of the auction and the closing.