Absolute Auction

What Is an Absolute Auction?

An absolute auction is a type of auction in which the sale is granted to the highest bidder. Absolute auctions don't have a reserve price, which sets a base required bid for the thing to be sold.

How an Absolute Auction Works

There are various types of auctions. A fixed bid auction, for instance, is an auction wherein individuals submit secret bids, while in a Dutch auction, the auctioneer begins at a high price and diminishes it until someone consents to buy the thing at that cost.

An absolute auction is the "exemplary" type of auction where the thing — whether real estate or some other type of produce — is sold to the highest bidder, no matter what the price. Since there is no reserve price or least floor above which bidding must beginning, the bidding in an absolute auction begins at $0.

Absolute auctions can happen in different settings, including the foreclosure marketplace, the online marketplace (like eBay.com), or live auction occasions. School establishments and noble cause, for instance, frequently hold absolute auctions to fund-raise.

Absolute auctions are much of the time executed where there is an immediate demand to sell a thing.

Absolute Auction versus Lender Confirmation Auction

One type of absolute auction connects with foreclosed properties, where the triumphant bid gets the foreclosed property. In spite of the fact that it is highly improbable, if by some stroke of good luck one person were to appear at an absolute auction, their bid would be accepted, regardless of how low the amount of money being bid.

An absolute auction is unique in relation to a lender confirmation auction, in which the lender must support the bid to complete the transaction. In real estate, on the off chance that a foreclosure is sold at a lender confirmation auction, the highest bidder doesn't be guaranteed to win. The individual with the triumphant bid must have the money to spend as well as be checked and accepted by whoever is holding the mortgage, be it a bank or the government.

Foreclosed properties are frequently sold through an absolute auction; potential buyers can determine from the mortgage holder (frequently a bank) on the off chance that the property will be sold at an absolute auction or by a lender confirmation auction.

Illustration of an Absolute Auction

Bert and Ernie have chosen to close their farm equipment business. They need to immediately liquidate every one of the things in the business and don't have a base price they are attempting to get for any of the things. They hold a live auction in which the bidding begins at $0 for the things and the highest bidder for each piece of equipment wins it. This is an illustration of an absolute auction.

Highlights

• Farm equipment and machinery are the sort of things that are frequently sold at an absolute auction.
• Absolute auctions are a famous type of auction, particularly for those hoping to make a cash sale rapidly and without complexities.
• A very much promoted absolute auction will typically get a large number of bidders.