OT - House Buying at Auction

Recently, a friend of my Wife sold a home and it's furnishings via auction. In her friends opinion (and ours), it did not go well. Don't know the terms of the auction, but it sounds like the furnishing sold barely covered the auctioneer's fees for the day. During the bidding, the minimum bid on the house had not been reached and the auctioneer halted the auction. The auctioneer asked the lady, "do you want to sell the house today." She said, "Of course I want to sell it." The auctioneer took that answer to contractually to mean, there is no minimum price, restarted the bidding and promptly sold the house below the minimum. The woman was stunned. She thought the question about selling was conversation, never occurred it was binding.

This auction happened about a month ago, whatever the required down payment has not been paid to the woman, and the auctioneer is vague and not forthcoming as to when she will receive the down payment or the remaining balance.

In the mean time, the buyer has been given the keys to the house by the auctioneer and is starting work on the house, including landscaping it with heavy equipment.

It all sounds fishy to me - but maybe it's the norm?

I think the lady needs to lawyer up and let them ask the questions and demand answers.

But.....

Typically on an auction, isn't there a down payment required at the time of the sale and the balance due shortly after the sale? Working from memory here, but I seem to remember that the time line in which the payment is due kind of precludes the long drawn out mortgage process with a bank simply due to sometimes it taking several months for all paperwork, inspections, etc., to take place.

We're not getting involved, but would like to know what is the norm on a sale as described above.

Thanks!
Bill

Around here yes some deposit sale day or have to deposit say 10 grand to bid. Must close in full in say 30 days can't move in till its done. Some exceptions to the guy that pays in full day of sale!!!! Had friend bid and pay in full day of sale told outfit to sign papers and get out of here, in vulgar language

Auctions I have been at require 10% at time of sale. Auctioneer did not treat her right, and she was naïve concerning "do you want to sell it today". But, she needs to know immediately when she will be paid, and turning over the keys is nothing, she must not sign a deed until she is paid. Did somebody just get off a boat? I smell fish.

Around here it is 10% down the day of sale and the balance within 30 days at closing. I the seller can't get a clear deed in 30 days the money goes back to the buyer and the deal is off, or If the buyer can't get the financing in the 30 day period the deal is off and the seller keeps the down payment. Unless they work out something different. There has to be a real estate agent at the auction unless the auctioneer has a real estate license to be sure the state law is followed. Something ain't rite here.

My experience has been anyone interested in bidding on realestate must meet with the auctioneer just before sale starts. At that time, potential buyers must have letter of credit, and agree to the terms of 10% down today, and the balance to be paid in "x" number of days, usually 45-60 days.

I'd say she needs to be at a reputable and competent attorney's office ASAP.

This is a shocker. According to my local paper the economy is booming.

This area, deposit amount, usually 10% of expected sale price has to be deposited in form of cashiers check with the auctioneer BEFORE the start of the sale as a condition of bidding. Unsuccessful bidders are given their check back after sale. This lady needed an attorney a month ago. Here in the upper mid-west, auctions tend to sell things well for the owner. Some other places, not so well. A person needs to know their market. Any real estate deal, money should be in bank before keys are handed over. When I bought my current place, I needed to move before we could possibly close on the deal. Convinced the seller to rent for two months, cash upfront, house was empty anyway so it wasn't a big deal to them. Yes it cost me a bit more, but was better than living in a snow bank!

The auctioneer should not be handling the down payment. There should be a closing company handling the transaction. Keys should not have been given to the buyer until day of closing. In the event the buyer cannot obtain a loan who will put the house back together. The seller will. Will the sellers insurance cover the house if it should burn down or get flooded before closing, I don't think so.

I owned a real estate company and was proncipal broker, I strongly disapproved of possession before closing.

If the auctioneer is taking charge of this, my thoughts are he is overstepping his authority.

Admittedly, I studied just enough law to be dangerous, but it would seem to me that if a down payment has not been forthcoming the deal would be off and the bidder be required to restore the premises to the original form. It all hinges on the terms of the auction that were stated on the auction bill. If there was a minimum price in writing with the auctioneer, I don't see how the lady's verbal, offhand comment could override it.

As others have said, this lady needs to see a competent attorney ASAP.

Weren"t the terms of sale printed/announced prior to the auction? Regarding down payment, closing terms?

She can start by contacting the SCC in Richmond about the auctioneer they have authority over auctioneers in Virginia.And an attorney.

Usually here in MI it's 10% down and close within 30 days. I would contact a lawyer.

(quoted from post at 19:16:50 01/02/16) My experience has been anyone interested in bidding on realestate must meet with the auctioneer just before sale starts. At that time, potential buyers must have letter of credit, and agree to the terms of 10% down today, and the balance to be paid in "x" number of days, usually 45-60 days.

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Everything varies by state, I've bought farms I didn't go to the auction to buy, just seemed like a great deal. Never had an issue in Oklahoma with having to meet with auctioneer in advance, and they always accepted my personal check.

Sounds wrong on every level...Lawyer up ASAP.
I would also look into who oversees and licenses auctioneers. My guess would be the auctioneer could be in some hot water.
My guess is the buyer is trying to flip the house and is trying to put off payment as long as possible.
My other guess is that the buyer and auctioneer are in on it together or have some sort of relationship...

There should be terms printed on the sale bill and the auctioneer should have taken the deposit when they signed the papers for the sales agreement. If no money was received and a deposit was specified the is no sales agreement - basic part of contract law. The fact they have started work before closing puts the current owner in an extremely powerful negotiating position - the buyers have just lost everything they've done.


I went through something similar a few years ago, the realestate woman agreed to a sale on a house and didn't collect the $2000 earnest money I had made as part of signing any sales agreement. She went on and on about how they were good people and she knew them and it wasn't an issue, reluctantly I agreed and signed. The day before closing they called and said they had changed their mind. The saleswoman was pretty shocked and I was pretty &%^#ed off. Found out she was holding out on me, there was another buyer she hadn't told me about and he signed his sales agreement that day, for a higher price than the first couple - and he paid the earnest money. Apparently she was trying to help out the first couple and for screwing me in the process (holding back the competing offer) they screwed her over by backing out of the deal.

Have never in my 72 years have heard of that must meet with auctioner before sale, must only be one auctioneer. Any body can step in and bid. But must be ready to give the required down and rest at closing and that date is usually 30 days but can be set different by people involved, owner, auctioneere and attorney as useally there is courts involved from start. Very few land sales that the courts have not been involved. And am friends with different auctioneers.

A sales agreement should have been drawn up immediately after the auction. If the seller signed it, she is committed to closing the sale. If not, she still owes the auctioneer his commission.

The down payment should be held in escrow until closing.

Get over to that property and "advise" that buyer that he must vacate the property immediately as you are vacating the sale due to the fact there was no down payment received. Furthermore, if he does make the down payment he cannot take possession until after the closing. Make sure she keeps the deed in a safety deposit box. I have an inkling the auctioneer has it in his possession.

Do you want to sell today pretty much is saying do you want to drop the reserve. I guess she was not aware of that. Obviously an unfortunate situation. She was probably better off with a realtor than an auction.

If there was no signed sales agreement why would she owe the auctioneer money? If the sales document called for a deposit the auctioneer didn't collect the sales agreement is void. The auctioneer's commission is based on selling the property, if he didn't execute the sale there's no commission to be paid. If there was a deposit/earnest money to be collected and the auctioneer failed to do so and went so far as to allow the buyer to take possession before closing (giving them the key and as the seller's representive allowing "improvements" before closing) the auctioneer has a lot of problems.

If she said "sell it" and everyone assumed the reserve was off and then she refused to sell - there might be a some question on the auctioneer being paid. The problem is he asked her if she wanted to sell it today, not if she wanted to drop the reserve. It sounds like they are past that part though. It sounds more like the sales agreement has been signed but the buyer and auctioneer are not abiding by it.

Agreed. Either way the sellers need to put a stop to the work on the property and get the auctioneer to fully explain how this deal is going and what has and hasn't been done.

In VA it is usually 10% down the day of the sale (which is stated in the ad for the auction) and the balance is due when the deed changes hands (usually 4 to 6 weeks). During that time you are liable for any accidents since it is still your property. I would contact your lawyer first thing in the morning to see what you can do legally. As for the auctioneer I don't think he acted in your best interest and you may want to ask your lawyer about what you can do about that.

Thanks everyone for your comments. Not sure what the next step is for my Wife's friend, but certainly you've confirmed my thoughts.

Thanks,
Bill

Do you want to sell today is asking if I should keep trying or go to a no sale mode. not if you want to lower the reserve.