An absolute auction is where the highest bidder wins without a reserve price. It’s commonly used for foreclosed properties and selling assets quickly. Online auction sites can also use this method.
An outright auction in which the individual or company placing the highest bid is the winner and recipient of the auctioned item, after successfully delivering payment to the seller. Typically, an absolute auction does not have a reserve price that must be met, meaning that none of the bids submitted must exceed a certain amount to qualify. This is in contrast to other types of auctions where a reserve price must be met or the seller has the option of not honoring the highest bid and remaining in possession of the item instead.
There are several situations in which an absolute auction can take place. One of the most common has to do with the sale of foreclosed properties. In some jurisdictions, owners of foreclosed properties will choose this type of auction as a means of attempting to sell the property as soon as possible. By choosing not to designate a reserve or minimum price that bidders must meet in order to have a chance of winning the property, the seller increases the chances of at least recovering some of the losses on the property sooner rather than later. Foreclosed title deeds agencies sometimes use this method when the property has been vacant for an extended period of time and maintenance costs are becoming less affordable in relation to the actual value of the property.
An outright auction strategy can also be used with other types of auctions, usually when the owner’s focus is on selling the items without expecting a minimum amount for those items. This approach can be used as a means of selling assets associated with a property, such as jewelry or artwork. The idea is usually to dispose of the items quickly and generate any realizable revenue, while allowing the former owner to avoid incurring further costs related to those assets, such as the cost of storing a warehouse or the cost of maintaining property insurance.
Online auction sites can also be structured to allow for an absolute auction. This applies to sites that don’t require sellers to set any kind of minimum or reserve price that must be met. In this case, even a very low bid will be enough to win the item, even if there are no other bidders. Just as with public auction houses that allow customers to choose a reserve price for each auction or waive the minimum bid requirement, online auction sites are likely to charge some sort of commission to the seller, typically based on the amount of the winning bet.
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