OHIO ASSOCIATION OF REALTORS
AUCTION WHITE PAPER
Published by: OAR’s Legal Services Group
Selling Real Estate at Public Auction: Is This a Viable Option for Your Clients?
June, 2005
by Mary Catherine Pelini Grillo, Esq.2
and H. John Kramer, GRI, CAI, AARE3
PART ONE: INTRODUCTION
According to one experienced real estate agent and auctioneer,4auctioneers and real estate brokers/agents have a long history of being on two separate sides of the fence. REALTORS and auctioneers once viewed each other only as adversaries, vying for the sellers’ market. Over the years, however, the two sides have begun to work more cooperatively, having found that working together to make a sale can benefit everyone involved. Marketing real estate at public auction, instead of following the traditional exclusive listing5and marketing methods, is an option for all REALTORS’ clients to consider.
Many of the legal, ethical, and professional guidelines for REALTORS following the traditional listing and marketing methods are the same for a REALTOR selling property at public auction. However, there are some additional requirements and considerations.This article will explain the auction process and the special issues related to it so that you, as a REALTOR, will knowledgeably be able to advise your client of this option and successfully take advantage of it.
PART TWO: IS A PUBLIC AUCTION RIGHT FOR MY CLIENT?
2.1. Are all properties suitable for sale at a public auction? Are all sellers and buyers suited for participating in a public auction?
All properties are not suitable for sale at a public auction. For the majority of properties–including residential, commercial, and land sales–auctioning can work effectively. It is important, nonetheless, for the REALTOR to cooperate with an auctioneer to forecast the probable outcome of an auction. Only by carefully considering the relevant market and the perceived condition of the property will a REALTOR be able to ensure the effective use of a public auction.
Additionally, some REALTORS point out that some sellers and buyers may not be suited for comfortable with selling or buying properties at a public auction, which may be stressful and which demands quick decision making. Proper counseling by the auctioneer is important.
2.2. Why may a client prefer an auction?
Most sellers who choose an auction to market a property are ordinary sellers with ordinary needs, who engage a local auctioneer, most of whom are REALTORS, to conduct the auction. In fact, sellers faced with bank foreclosures and bankruptcies6represent only a small percentage of those choosing auctions. A public auction can provide a cost-effective, accelerated method for selling real estate by any client who wants to eliminate the long-term labor and carrying costs of selling the property through the traditional private treaty marketing method. Alternatively, a public auction may be a method chosen to ensure an equitable sale of a property which several friends; family members or neighbors have expressed a desire to buy, as all may bid.
For one example, taking into account mortgage payments and the costs of utilities, insurance and taxes, it costs approximately 1% of the property value per month to maintain ownership of a property. A property valued at $350,000, therefore, can cost $3,500 a month for upkeep while it is on the market. Consequently, clients who have bridged a mortgage, or clients faced with relocation, may find it more beneficial to eliminate these costs as quickly as possible rather than to hold onto the property in hope of receiving the highest possible sale price. For a second example, families faced with selling real estate after the passing of loved ones may find that selling the property at public auction is an effective way to bring closure to a situation. REALTORS should remind their clients that an auction is not always the quickest method of selling a property, as there is always a possibility that a buyer will enter into contract for an exclusive listing and that the sale of this listed property will close in two weeks. However, a client who selects the auction method to market a property is able to set a timetable for the auction date and the closing with the REALTOR in advance.
PART THREE: PREPARING FOR THE AUCTION OF REAL ESTATE
3.1. The Auctioneer of Real Estate
(a) The Licensed Auctioneer
Only a licensed real estate broker or salesperson who is also licensed as an auctioneer, apprentice auctioneer or auction company within the State of Ohio may verbally call for, recognize and accept bids.7An individual who does not fall within one of the limited statutory exceptions from licensure cannot serve as an auctioneer within Ohio without first obtaining a license issued by the Ohio Department of Agriculture.8Moreover, in order to contract to sell real property at auction, an individual must maintain both an auctioneer’s license and a real estate license.9(b) In-house vs. Outside Auctioneer Under Ohio law, only a real estate licensee who is also licensed as an auctioneer may contract for the sale of real property at auction; however, a licensed real estate broker not also licensed as an auctioneer may contract to sell real property if either (1) the broker has an affiliated salesperson who is also a licensed auctioneer or (2) the broker enters into a cooperative agreement with another licensed broker associated with a licensed auctioneer.10 Therefore, two options exist for a broker who desires to use the auction method. The broker may have an inhouse agent who maintains an auctioneer’s license perform the auction. Alternatively, the broker may cooperate with an outside auctioneer, who must be associated with another real estate broker, to conduct the auction. In either case, the licensed auctioneer must be working with a licensed real estate broker.
(c) Obtaining and Maintaining an Auctioneer’s License
The Department of Agriculture may grant auctioneers’ licenses11and apprentice auctioneers’ licenses12to persons determined by it to be qualified. In order to obtain an auctioneer’s license, an individual submits an application on forms provided by the Department of Agriculture.13An applicant must generally have a place of business in Ohio.14An individual also must pass written and oral examinations given by the Ohio Department of Agriculture.15The applicant (or a licensee seeking renewal) cannot obtain (or maintain) a license if he or she has been convicted of a felony or a crime involving fraud or theft within the ten years preceding the application (or renewal).16Every applicant for an auctioneer’s license must provide proof to the Department of Agriculture, on forms made available by it, that the applicant (i) has a good reputation; (ii) is trustworthy; (iii) is at least 18 years old; (iv) has met either the apprenticeship requirement or the reciprocity requirement; and (v) has a general knowledge of the local, state, and federal statutory law governing auctions, the auction profession and the principles involved in conducting an auction.17The Department of Agriculture may issue a license to a partnership, association or corporation if 50% of the partners, members or officers are licensed as auctioneers.18 Upon issuance of a license, the corporation, partnership or association must designate one licensed individual from among its directors, partners or members to communicate with the Department of Agriculture.
Every applicant for an apprentice auctioneer’s license must pass an examination relating to the skills, knowledge and statutes and regulations governing auctioneers.19No licensed auctioneer may have more than two apprentice auctioneers at one time.20If an auctioneer wants to end his or her sponsorship of an apprentice, the auctioneer must notify the apprentice by certified mail (return receipt requested) at least 10 days prior to the effective date of termination, sending a copy of the notice and the apprentice’s license to the Department of Agriculture by certified mail.21Likewise, an apprentice wishing to terminate his or her sponsorship by an auctioneer may do so by giving the sponsor and the Department at least 10 days’ advance written notice by certified mail.22
There is a fee for each auctioneer’s or apprentice auctioneer’s license issued by the Department of Commerce.23In addition, an applicant must accompany a license application with a $25,000 bond or an irrevocable letter of credit.24If the individual’s application is accepted, a permanent license certificate is given to the auctioneer.25This certificate, as well as the appropriate portions of the license renewal card discussed below, must be displayed in a conspicuous place at the auctioneer’s place of business.
An auctioneer must renew his or her license bi-annually on the last day of June26. The Ohio Department of Agriculture will automatically renew these licenses upon receipt of the applicant’s written request and the renewal fee. An auctioneer must notify the Department of Agriculture of any change in the location of the principal place of business in order to keep his or her license valid. No examination is required for renewal unless the license has been revoked or suspended or unless the license has expired. If a license has expired, an auctioneer may not engage in any auction activity until the new license is issued.
Besides conspicuously displaying the appropriate portion of the annual renewal card, the licensee must carry the appropriate portion of the renewal card at an auction.27
Any change of business location without notifying the Department of Agriculture automatically cancels any previously issued license.28If notice is given, the Department will issue a new license for the unexpired period upon the licensee’s payment of a fee.29
A licensed auctioneer must maintain a trust account in an Ohio depository to be used to hold all deposits, escrow funds and other amounts received in a fiduciary capacity in connection with an auction of personal property. Any deposits, escrow funds and other amounts received in a fiduciary capacity in connection with real estate shall be deposited in the Real Estate Broker’s Trust Account as is customarily done on listed properties. Additionally, auctioneers must keep on file records related to any auction sale for at least two years from the date of auction. These records should include, at a minimum, the following: settlement sheets, written contracts, and copies of any advertising that described the property for sale.30
3.2. Creating an Agency Relationship
(a) Auction Agreements
The auctioneer’s authority is derived solely from the owner of the real estate. A proper auction agreement between the auctioneer and seller, therefore, is required prior to the auctioneer’s marketing of the property.31This contract, similar to a regular brokerage listing agreement, must be in writing and must be signed by the auctioneer who is also licensed as a real estate broker or salesperson.32
An apprentice auctioneer is not permitted to enter into a contract or agreement on a sale at auction without the written consent of the apprentice auctioneer’s sponsoring auctioneer, and all contracts or agreements must be made in the name of and on behalf of the sponsoring auctioneer. Moreover, an apprentice auctioneer cannot enter into an auction contract for the sale of real property in the name of the sponsoring auctioneer regardless of whether the apprentice auctioneer is licensed as a real estate broker or salesperson.33
The auction agreement must contain the terms and conditions on which the licensee will accept the property for sale at auction. Under the auctioneer’s license law the auction agreement must specify all of the following:
(1) The owner of the property to be sold or the owner’s agent or the consignee;
(2) The date of the auction or a termination date of the contract or agreement;
(3) The location of the auction;
(4) The terms and conditions of the auction;
(5) All of the fees to be charged by the auctioneer or the auction firm, which must include commissions, rentals, advertising, and labor;
(6) An explanation of the settlement of the auction that includes the disbursement of interest money, if applicable;
(7) A statement establishing the responsibility for bad checks, debts, and unpaid auction items;
(8) A statement indicating whether the auction is a reserve auction or an absolute auction. In addition, the statement must include the definition of reserve auction or absolute auction from the bill, as applicable.
(9) A statement of the auctioneer’s or auction firm’s policy regarding absentee bidding:
(10) A brief description of the real or personal property to be sold; and
(11) If the sale is of real or personal property at absolute auction, a statement affirming that the seller of the real or personal property has a bona fide intention to transfer ownership of the property to the highest bidder.34
Ohio law specifies that the auctioneer or special auctioneer who contract with the owner is liable for the settlement of all money received, including the payment of all expenses incurred only by the licensee and the distribution of all funds in connection with an auction.35Further, all contracts or agreements must contain a statement indicating either that the licensee is bonded in favor of the state, as required in current law, or that an aggrieved person may initiate a claim against the existing Auction Recovery Fund as a result of the licensee’s actions, whichever is applicable.36
Under the real estate licensing law, an agreement for the sale of property by auction is considered an agency agreement. As such, it must include a definite expiration date and the mandatory fair housing statement and logo. Such language is required if the property is vacant land or falls under the definition of housing covered by the fair housing laws.37
(b) Agency Disclosure
Auctioneers are primarily agents of the seller because they clearly work on behalf of the seller to attain the highest bid possible. Dual agency (representing both the seller and buyer), therefore, seems a practical impossibility in spite of being a legal possibility. The real estate licensing law requires real estate licensees to disclosure who they represent to both buyers and sellers of real estate. Therefore, in the sale of real property by auction these provisions apply.
Licensees selling property at auction must provide the seller with their “Consumer Guide to Agency Relationships” before they market or show the property.38At the auction, they must verbally disclose to the audience that they represent the seller. Then the auctioneer/REALTOR must provide a “Consumer Guide” and an Agency Disclosure Statement to the successful bidder, prior to the bidder’s signing a purchase contract.39
3.3. The Method of Auction
(a) Reserve Auctions
Ohio Auction law defines “reserve auction” as an auction in which the seller or an agent of the seller reserves the right to establish a stated minimum bid, the right to reject or accept any or all bids, or the right to withdraw the real or personal property at any time prior to the completion of the auction by the auctioneer.40It then requires an auction to be a reserve auction unless explicitly stated otherwise in the contract for the auction and in the terms and conditions governing the auction. For purposes of a reserve auction, there need not be an announcement or indication that the reserve is attained.41
(b) Absolute Auctions
Under Ohio law an “absolute auction” is defined as an auction of real or personal property to which all of the following apply: (1) the property is sold to the highest bidder without reserve, (2) the auction does not require a minimum bid, (3) the auction does not require competing bids of any type by the seller or an agent of the seller, and (4) the seller of the property cannot withdraw the property from auction after the auction is opened and there is public solicitation or calling for bids.42
No person licensed under the Auctioneers Law can advertise, offer for sale, or sell real or personal property by absolute auction unless one of the following applies: (1) except for current tax obligations, easements, or restrictions of record of the seller, there are no liens or encumbrances on the property in favor of any other person; (2) Every holder of a lien or encumbrance, by execution of the auction contract or other written agreement provided to the auctioneer, agrees to the absolute auction without regard to the amount of the highest bid or to the identity of the highest bidder; or (3) A financially sound person, firm, trust, or estate, by execution of the auction contract or other written agreement provided to the auctioneer, guarantees the complete discharge and satisfaction of all liens and encumbrances, as applicable, immediately after the absolute auction or at the closing without regard to the amount of the highest bid or to the identity of the highest bidder.43
Further, before property can be sold at an absolute auction the auction contract must specify that it is an absolute auction and not a reserve auction. It must also prohibit the seller or anyone acting on his behalf to bid or participate in bidding at the auction.44
Finally, the seller must have a bona fide intention to transfer ownership of the property to the highest bidder regardless of the amount of the highest bid and without reliance on any agreement that a particular bid or bid level be attained in order to transfer the property.45
(c) Bidding by seller or licensee
Ohio auction law authorizes a seller or a person on behalf of a seller to make a bid if the auction is a reserve auction and the auctioneer provides full disclosure before bidding begins that the seller retains the right to bid. It prohibits any person licensed under the Auctioneers Law from knowingly receiving such a bid in the absence of full disclosure.46
With respect to absolute auctions, Ohio law states that neither the seller or anyone acting on behalf of the seller can bid or participate in the bidding process of an auction.47
However the auction license law does not prohibit any of the following:
(1) The bidding of a secured party or lien holder, other than the seller, at an absolute auction, provided that the bids are bona fide offers, that the bidding does not constitute bid rigging or a reserve for the seller, and that the bidding is not for the purpose of aiding or assisting or on behalf of the seller or the auctioneer;
(2) The bidding by an individual or party to a dissolution of marriage, partnership, or corporation on real or personal property being sold at auction pursuant to the dissolution; or
(3) The advertising of real or personal property to be sold by absolute auction and by reserve auction within the same advertisement or for auction on the same date and at the same place. However, the advertisement cannot be misleading and must clearly identify the property that is to be sold by reserve auction.48
At an absolute auction it is a violation of auctioneering laws for an auctioneer to knowingly receive a bit from a seller or someone acting on their behalf, except in the case of a dissolution.49 Finally, Ohio’s auction law addresses whether an auctioneer can bid for himself on property he/she is auctioning. It permits a bona fide bid on the licensee’s own behalf at an absolute auction and at a reserve auction, provided that the licensee provides full disclosure that the licensee may make a bona fide bid to the seller and at the auction.50
3.4. Location for the Auction/Posting Sign
Auctions can be conducted on-site or off-site. The location may depend on one or more of several factors. When selecting an auction location, an auctioneer must consider parking, neighbors, crowd control, restroom facilities, food facilities in some instances, weather and aesthetics. An off-site auction may give an auctioneer better control over the auction environment including audience comfort so that the trend is moving toward off-site auctions. Off-site auctions may also be used when multiple parcels are being sold, as such auctions may last several hours and conditions, especially weather, may become less predictable. On-site auctions are best when the seller wants to capitalize on the condition and appearance of the property. In contrast, off-site auctions work best when the seller wants to de-emphasize the condition of the property. For logistical reasons, off-site auction locations also work best for large sales. For example, multiple property sales (most common for investment purposes) and multiple parcel sales (most common for investment or farming purposes) are generally conducted off-site.
Anyone licensed under the Auctioneers Law that conducts or is involved in an auction jointly are responsible for the posting of a sign at the auction. The sign must contain the name of all licensed persons involved in the auction, a statement that the persons are licensed by the Department of Agriculture, and the address of the Department. The sign must be posted at the main entrance of the auction, at the place of registration for the auction, or by the cashier for the auction. It must be of a size no smaller than eight and one-half inches by eleven inches. The letters and numbers on the sign must be of adequate size to be readily seen by an individual with normal vision when viewing it.51
Practical Considerations: Multiple Property/Parcel Sales
Using a multiple property auction method can help maximize the sale price for the owner. Through this method a buyer has the option to bid on one property, a combination of properties, or all of the properties offered.
3.5. Advertising an Auction
Any advertising for an auction must comply with laws applicable to both auctioneers52 and real estate brokers.53Under these laws an advertisement for the sale of real property at auction must contain the name of the licensed auctioneer who is entering into the auction contract and the name of the real estate broker licensed under the Real Estate Brokers Law who is involved in the sale.54The ad must also state that these individuals are licensed as an auctioneer and/or broker. Any apprentice auctioneer who advertises must also comply with these requirements and must disclose the name of the auctioneer under whom he/she is licensed.
Often advertising materials will announce the terms and condition of the sale and describe the property being sold. If the property is being sold by absolute auction , the auction laws require that this fact be “unequivocally” stated in the ads.55
The ORC also requires that if an advertisement for an auction contains the words “estate auction,” or words to that effect, the person licensed under the Auctioneers Law who advertises do both of the following: (1) enter into an agreement directly with the executor, administrator, or court appointed designee of the estate property, and (2) list prominently in the advertisement the county in which the estate is located and the probate court case number of the estate.56
3.6. Cooperating with Other Brokers
The common courtesies and ethics that apply in the traditional real estate setting apply equally in the auction context. Thus, the code of ethics and rules of arbitration derived from the Board of Realtors govern brokers involved in auction transactions.
Auctioneers are noticing a trend toward more cooperation between auctioneers and other agents. Brokers list auction properties in multiple listing services with the noted classification as “auction property” and the status of the transaction (i.e. whether set for auction, contract pending, etc.) so that buyers’ agents have an opportunity to recommend these properties to their clients.
Prospective buyers who attend an auction are usually asked to register prior to bidding. This registration requirement satisfies the auctioneer/broker’s duty to the seller to be informed about who is bidding, ensures to the auctioneer that the pre-registered bidder has the information packet or due-diligence package containing the agency disclosure form, and gives the buyer an opportunity to disclose whether he or she is represented by an agent. As is evident, therefore, the rules of “procuring cause” apply, and any real estate agent properly responsible for bringing a buyer to the auction will be entitled to a commission upon making the winning bid. It is recommended that REALTORS representing buyers attending an auction advise their clients to prequalify for a home loan or line up financing and if possible do other due diligence such as a home inspection in advance of the auction.
REALTORS experienced with auctioneering have disclosed a practice of charging a “buyer premium”, which is a fee paid by a buyer on top of the purchase price which may be as high as 5 to 10 percent of the purchase price. Any such fee should be disclosed in any ads and in the bidder package.
Practical Considerations: Registration of Represented Buyers
In order to make sure that an undeserving “buyer’s” agent does not receive a commission, a seller’s agent sometimes requires represented buyers to preregister at least one day in advance. By forcing buyers’ agents to forward their agency disclosure forms to the seller’s agent prior to the auction day, the seller can protect against agents improperly roaming through the auction crowds to find bidders to represent.
PART FOUR: AUCTION DAY
4.1. The Auction Assistant
Non-auctioneer employees are allowed to help conduct auctions. As long as they are not acting as licensed auctioneers, these employees—commonly referred to as “ringmen” or “pitmen”–are not required to be licensed. To avoid the licensure requirement, ringmen cannot talk with prospective buyers about anything relating to the property or the terms and conditions of the sale. However, ringmen can serve two important functions: (a) assisting the auctioneer in locating bids made from the crowd and (b) convincing prospective buyers to continue bidding.
Practical Considerations: Licensed Auction Assistants
Licensed auctioneers are sometimes used as ringmen at an auction, especially if the auction is expected to produce a lot of interest so that they can answer questions from prospective buyers and better monitor the situation without violating licensure requirements.
4.2. Live vs. Internet Auctions
In the experience of auctioneers, if they have done their marketing job correctly, prospective buyers arrive at an auction eager to bid, which may drive up the price of the property.
Perhaps because auctioneers sense the eagerness increases when bidders are actually there in person–and that this affects the auction price, and also because auctioneers appear to continue to believe that purchasing real property is a hands-on experience and that buyers prefer being “live” at the auction to see and touch the property, the internet has not yet begun to displace live auctions of real estate, at least within Ohio. Nationally, a few companies are experimenting with real estate auctions over the internet, with success to be determined. At this point, the internet seems to be used most frequently in the real estate auction context as an informational and marketing resource. Effective May 6, 2005 Ohio law specifically exempts from the requirement to be an auctioneer, persons selling real or personal property via the internet.57
4.3. Contract Issues
(a) Terms and conditions of sale
Sellers have the right to set the terms and conditions of the sale and usually do so with advice from the auctioneer. These terms and conditions must be included within the purchase contract, which is made available to prospective bidders prior to the auction (usually within the bid package). Auctioneers have a duty to conduct the sale openly and fairly, by orally summarizing the terms, conditions, and warranties of contract before starting the bidding. As a general rule, bidders have a right to rely on the printed conditions and the auctioneer’s oral representations. Representations made on the day of sale supersede all others and bind the parties (even if, for example, the buyer does not hear or understand the auctioneer or the auctioneer misstates a condition that hurts the seller’s position).
The property is generally sold “as is”, i.e. the winning bidder gets what he or she sees. If a problem arises after the contract is signed, even if prior to the closing, the buyer bears the burden of loss and cannot void the contract. The seller is generally responsible for providing title insurance, gas warranty, termite inspection, etc., although he or she may require the buyer to do so as a condition of the contract.
The terms of sale generally provide for the highest bidder to deposit earnest money–a set percentage of the purchase price or a stated amount–and enter into a purchase contract immediately following the auction. The balance of the purchase price generally must be paid within thirty to sixty days, at the time of closing.
Practical Considerations: Recording the Auction
In order to protect against disputes that may arise over what has been represented on the day of sale, the seller’s agent might video- or audio-tape the auction proceedings.
(b) Contract Formation
A contract is formed when the auctioneer accepts a bid on behalf of the seller. This occurs with the “fall of the hammer,” or more often than not, with the auctioneer verbally announcing that the property has been sold. Bids themselves are only offers and, therefore, can be withdrawn at any time prior to the auctioneer’s final acceptance. If a bid is made right as the auctioneer is about to signal final acceptance of the prior bid, the auctioneer has discretion to either reopen the bidding or declare the property sold under the prior bid. The new bid, however, will only be accepted as a continuation of the open bidding and not as the final offer. Once the auctioneer has orally accepted the highest bid, the parties should immediately enter into a purchase agreement. Applicable law requires the contract to be in writing and signed by both parties. While the acceptance of the bid creates a contract to sell, it does not necessarily pass title, and title passes according to the general rules.
4.4. The Duty of Disclosure
All disclosures required for traditional real estate sales are required for an auction sale. Accordingly, the auctioneer must orally disclose to prospective buyers, prior to the auction, that he/she represents the seller and, once a successful bidder has been determined, the broker must provide an agency disclosure form to be signed by the buyer prior to the buyer’s signing of a purchase contract. In addition, the auctioneer must provide prospective bidders with a residential property disclosure form and lead-based paint disclosure form, if applicable, in accordance with applicable law. REALTORS experienced with auctions have noted a prevalence of the use of “as is” clauses in the sale of properties at auction.
4.5. “Bid Rigging” and Other Prohibited or Questionable Practices
Ohio law forbids bid rigging,58and imposes stiff penalties on violators including criminal penalties. Bid rigging is defined under Ohio law as a conspiracy not to bid against each other or otherwise to decrease or increase the amount or number of bids. Such an agreement operates as a fraud on the owner of the property. As one example, this statutory provision prohibits pools of bidders who conspire to hold down the price on the sale and later split up assets, although pools of bidders are less likely to be an issue in real property auctions than in personal property auctions because splitting up real estate (unless in the context of a multiple property sale) is more difficult to accomplish. As an example of prohibited practices on the seller’s side, the statute also prohibits “phantom bidding,” or the practice of auctioneers who want to drive up the price by pretending that bids have been made by competing bidders who do not actually exist. Additionally, sellers cannot attend an auction to bid up the price unless this fact is clearly disclosed to prospective buyers. Phone bidding is permitted by law and usually occurs when prospective buyers cannot attend the auction (or have an agent present but want to participate). Phone bidders must coordinate the details with the seller’s agent. Typically a phone bidder must pre-register and tender the earnest money prior to the auction. Then the auctioneer/broker assigns someone to staff the phone and bid as prompted by the phone bidder. Obviously, if the bidder does not succeed in making the highest offer, then the seller returns the earnest money.
PART FIVE: CONCLUSION
Selling real estate at auction is growing in popularity and can be a successful way to sell or buy real estate. Although auction sales make up only a small number of the total real estate sales, brokers and agents need to be familiar with the process so that they can inform their clients about auctions as an option and assist them. There are several professional trade organizations for auctioneers, including the Ohio Auctioneers Association (“OAA”), the National Auctioneers Association (“NAA”) and the Auction Marketing Institute (“AMI”), which is the educational arm of the NAA.
The National Association of REALTORS Auction Committee has prepared a 1993 report entitled “Real Estate Auction Advantages” for the Seller, Buyer and Agent. A copy can be obtained by contacting NAR.
Footnotes for Auction White Paper
1 The information presented in this article is not intended to be–and should not be construed as–legal advice. Readers should be especially aware that the focus of this article is on Ohio law governing auctions as they apply to the sale of real estate. This information was updated in May, 2005 by the legal staff of the Ohio Association of REALTORS to reflect revisions to the Ohio Revised Code made by SB 209 & 99.
2 Ms. Grillo is an attorney in the Columbus, Ohio office of Baker & Hostetler LLP, where she practices in the area of corporate and commercial (including real estate) law. Ms. Grillo can be contacted at mgrillo@bakerlaw.com, 65 East State Street, Suite 2100, Columbus, Ohio 43215, (614) 462-4756. The authors would like to thank Ms. Lisa Knickerbocker for her assistance with this article.
3 Mr. Kramer is Chairman of, and serving his 7th year on, the Ohio Auctioneers Commission. He is a past President of the Ohio Auctioneers Association and a member of its Hall of Fame, and a second-generation auctioneer. He is the owner of Kramer & Kramer Inc. Auctioneers REALTORS and specializes in the sale of real estate at auction. He obtained his auctioneer license in 1973 and his real estate license in 1972 and has been a full time Auctioneer & Realtor since 1975. Mr. Kramer can be contacted at http://www.kramerauctions.com or P. O. Box 85 – 420 N. Barron St., Eaton, Ohio 45320, (937) 456-1101.
4 The authors would like to acknowledge and thank Mr. Chris Davis of Coldwell Banker-King Thompson REALTORS who provided some practical information presented in this article and assisted in its editing. Mr. Davis started his career as an auctioneer in 1984, obtaining his real estate license in 1985. Mr. Davis has worked for the past 13 years in the auction division of King Thompson REALTORS, which conducted approximately 170 auctions in the year 2000. Mr. Davis can be contacted at http://www.auctionohio.com, 110 Polaris Parkway, Columbus, Ohio 43082, (614) 523-0808.
5 Auctioneers may use the term “private treaty listing” when referring to a traditional exclusive listing.
6 Court-ordered sales pursuant to bankruptcy are governed by slightly different rules. REALTORS would not be dealing with these sales as the courts contact qualified auctioneers directly. A separate process exists for auctioneers to be employed by the court.
7 Under Ohio law, an individual providing verbal auctioneer services without a license faces penalties.
8 Ohio Revised Code Section (“O.R.C. §”) 4707.02.
9 A licensed REALTOR may not perform a sealed bid auction without an auctioneer’s license if it is advertised to the public at a predetermined place and time.
10 O.R.C. §4707.021.
11 O.R.C. §4707.07(A).
12 O.R.C. §4707.09.
13 O.R.C. §4707.07.
14 O.R.C. §4707.14. Ohio law does permit nonresidents to operate in Ohio as auctioneers in certain circumstances. O.R.C. §4702.12; §4702.14. The Department of Agriculture may issue a one time auction license to a non-resident if that auctioneer’s home state would do the same (i.e., reciprocity applies) and the auctioneer agrees to be sued in Ohio for any disputes that may arise. O.R.C. §4707.072.
15 An examination is not required for renewal of a license unless the license has been revoked or suspended or is allowed to expire without renewal.
16 O.R.C. §4707.02.
17 O.R.C. §§4707.07(A), 4707.09 and 4707.12. Auctioneers who served apprenticeships and who hold licenses issued before May 1, 1996 are not subject to additional apprenticeship requirements. See O.R.C. §§4707.07(B) and 4707.08.
18 O.R.C. §4707.073.
19 O.R.C. §4707.09.
20 O.R.C. §4709.09.
21 O.R.C. §4707.09.
22 O.R.C. §4707.09.
23 O.R.C. §4707.10.
24 O.R.C. §4707.11.
25 O.R.C. §4707.10.
26 O.R.C. §4707.10.
27 O.R.C. §4707.10(D).
28 O.R.C. §4707.10(D).
29 O.R.C. §4707.10(D).
30 O.R.C. §4707.21. Note that auctioneers who are also licensed as real estate brokers must maintain these records for three years to satisfy the real estate licensing provisions.
31 O.R.C. §4707.20.
32 O.R.C. §4707.021.
33 O.R.C. §4707.20(A).
34 O.R.C. §4707.20(D).
35 O.R.C. §4707.20(C).
36 O.R.C. §4707.20(B).
37 O.R.C. §4735.55
38 O.R.C. §4735.56
39 O.R.C. §4735.58(B).
40 O.R.C. §4707.01(F).
41 O.R.C. §4707.022(A).
42 O.R.C. §4707.01(E).
43 O.R.C. §4707.023(A)(1).
44 O.R.C. §4707.023(A)(3).
45 O.R.C. §4707.023(A)(2).
46 O.R.C. §4707.023(D).
47 O.R.C. §4707.023(A)(3).
48 O.R.C. §4707.023(B).
49 O.R.C. §4707.023(E).
50 O.R.C. §4707.023(C).
51 O.R.C. §4707.22(E).
52 O.R.C. §4707.22.
53 O.R.C. §4735.16.
54 O.R.C. §4707.22(F).
55 O.R.C. §4707.22(C).
56 O.R.C. §4707.22(D).
57 O.R.C. §4707.02(H).
58 O.R.C. §4707.151; 4707.99
Updated 06/05