Types of auctions, their classification, characteristics and conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Auction is a way of trading without setting a clear price. That is, a certain product or group of products is put up for sale, and then the buyers themselves offer a price for this product. Whoever offers the best one gets the purchase. It would seem that there is nothing complicated, but everything is not so simple. There are several types of auctions, each of which has its own characteristics. In some cases, in order to win, the buyer must specify a price higher, in others, the price can be lowered. But what if the buyer mistakenly indicated the wrong price and cannot pay, or the product does not like it immediately after the purchase? In order not to get into a disadvantageous situation, you need to know some features of this method of trading.

Auction classification

The most common types of competitions and auctions are English and Dutch auctions. The difference between them is that the first one starts with a zero price per lot, while the price goes up during the bidding process. The peculiarity of the second type, Dutch, is that trading starts with a high rate, then the price either decreases or increases. The highest bidder wins.

There isAnother type of auction is American, but it does not concern the formation of prices, but only determines the procedure for placing and selling lots. So, the goods are not exhibited separately, but all together. And then they are issued in the order indicated in the list of participants. This type of auction is practically not used either when trading "live" or on online platforms.

The advantage of the auction over other ways of selling goods

Unlike selling goods at a fixed price, bidding in the form of an auction allows the buyer to purchase an item at a market price, and not at the one set by the seller. This is its essence. The type of auction used in one case or another depends on where and what product is being sold. For example, in online commerce, the English auction is mainly used, and in the sale of land plots, the Dutch auction is used. But this is not some kind of accepted, legalized rule for everyone. It's just that in most cases it's more convenient for both sellers and buyers.

When selling ordinary goods, including on the Internet on special sites, the auction gives the seller a chance to sell the goods at a better price, and in some cases determine the price and demand for a completely new product. For example, an entrepreneur has produced something new, but he does not know whether there will be demand and what level it will be. By putting up a product at auction, a businessman checks how buyers are ready to buy a new product and how much they are willing to pay for it.

Who can participate in the auction

There are closed and open auctions. The private auction is by invitation only, while the open auction is open to anyone. The main thing is that he had a desire to purchase goods and enough funds for the purchase. If the auction is held indoors, then participants must first register and pay a 10% deposit (the amount depends on what conditions are prescribed in the rules).

Bidding always takes place in a special room. The host announces the initial price, and then the buyers begin to bargain with each other, shouting out the price they are willing to pay. Special gestures can also be used for this.

What items can be sold or bought at auction

Many people think that only luxury items, antiques, paintings by famous artists and other expensive and rare items are sold at auctions. In fact, you can sell anything on it, from a pair of socks to an apartment or a house. Modern means of communication enable buyers to bid and buy any product without leaving home anywhere in the world.

Although any item can be sold at auction, commodities trade mainly exists in the form of online auctions. With live trading, auctions are arranged for the sale of more serious goods: furniture, household appliances, land, houses. It can also be arranged in case of bankruptcy of the enterprise. Then equipment, materials and unsold goods go under the hammer.

Foreign venues

The largest venues for auctions are in London and New York. They sell and buy expensive things: collector's editions, antiques and art objects, and not only of American or English origin. There are similar sites in other capital cities of many countries of the world, but they are much smaller and are not used in the form of an international auction. For the sale of less expensive goods, as well as goods sold locally, organizers build temporary sites or conduct auctions entirely on the Internet, for example on Ebay.

In most cases, auctions are held in trade pavilions, public or other convenient places. When, where and under what conditions the auction will take place, what goods (lots) will be exhibited, is announced in advance on television or in newspapers.

Domestic auction sites

In Russia, there were no auctions for a long time, although there was no official ban. There was simply no market, no goods that could be sold at auction. Everything changed with the transition of the country's economy from the socialist to the capitalist type. The form and order that the organization of auctions has acquired in Russia is largely due to the peculiarities of the Soviet and post-Soviet economies. In Russia, auctions are increasingly closed, in contrast to Western countries. And even if an auction is announced in some region, it is usually done not in the major media, but in some small newspaper in small, unreadable print.

Despite the requirements of the state to sell some goods, such as land, at open auctions, the auctions are still closed. Usually at such auctions they sell plots of land for large farmland, enterprises, industrial equipment.

There are also online auctions in Russia. They are not as large as the American sites, but they exist. They mainly sell old coins, Soviet and imperial securities, antique furniture, paintings, handicrafts, household items, Soviet-made equipment. The most famous Russian auction on the Internet is Newmolotok and Meshok. However, they are not as popular as similar sites. Therefore, most often our compatriots turn to foreign sites for auction trading. They have a wider audience, and there buyers are more likely to purchase antiques. In addition, their prices are an order of magnitude higher than on Russian sites.

How to participate

Usually, the address and date of the auction, as well as the venue is published in the media, or participants are sent a personal invitation. Participants come to the specified place, register, deposit funds. Everyone is recorded in a special journal and seated in their places in the hall. In Russia, auctions are most often held in palaces of culture or assembly halls of schools and universities.

All participants wishing to participate in the auction must have a passport or otheridentification document, invitation, if required by the conditions of the ongoing auction, and the funds that he is willing to spend and which he needs to deposit for registration.

Organizers exhibit goods-lots or announce their name if a product is sold that cannot be seen and touched. For example, an apartment or a business. The price of a lot can increase (decrease) arbitrarily or have a fixed character. For example, the price of a lot can only increase by 1,000 rubles. That is, each hand raised will mean that the buyer is ready to raise the price by 1000 rubles from the previous participant.

Trading Rules

The rules of the auction, their contents, as well as the process itself, depend not only on the type of auction, but also on the characteristics of the goods. The rules are negotiated in advance and announced before the start of the auction. They are usually listed in the same announcement that announces the date, time and place of such an event, but may also be published directly on the spot before the start of bidding. Rules must include:

• initial price of the lot(s) to be offered;
• composition and size of the lot. How many different products are included in it, how they are sold, all together or separately;
• order and amount of increase in the price of the lot, how the price increases (decreases);
• procedure for determining the auction winner;
• procedure for transferring the property to the winner;
• conditions for recognition of the dealinvalid;
• conditions and procedure for termination of the transaction, in case of refusal by the buyer to pay for the goods or refusal to transfer the goods by the seller.

The rules developed by the organizers of the auction must not contradict Russian laws and the Constitution. In our country, this type of transaction is regulated by the Civil Code of the Russian Federation, Article No. 448.

When and how can I receive the won item

The procedure for payment and receipt of goods purchased at the auction must be specified in the rules, published and known to all participants, regardless of the type of auction, quotes and the number of participants. Usually the goods are transferred or sent to the buyer immediately after payment. In some cases, such as when buying land or a car, the purchased goods must be registered in order to fix ownership. In any case, the right to receive the goods arises only after the completion of the auction and the payment of the fee.

How to cancel an item purchased at auction

The ability to refuse the purchased item depends on the type of competition or auction. If the goods are not satisfied with something or there are not enough funds to pay, the buyer has the right to refuse the purchase immediately. The possibility of refusal is prescribed in the law and no matter what is written in the rules, the buyer has the right to do this both before payment and after it. At the same time, if a problem arises, it is better to refuse before payment, since after it the termination of the transaction may be difficult. In some cases, the buyer will be required to pay a pen alty or a fine, but this is possible only whensuch measures were written in the rules, i.e. the buyer knew about them before the start of the auction.

Under the law, items sold at auction cannot be returned, even if they do not meet the quality standards adopted in the country. Since in the very concept and types of auctions it is laid down that the buyer himself evaluates the quality and sets the price. If several days have passed after the purchase, the seller may not return the money in exchange for the sold goods.

Consequences of termination of the transaction

If the goods were not paid for, then in most cases the termination of the transaction does not lead to any consequences. The product is put up for auction again or transferred to another participant who previously offered the highest price. It all depends on the type of auction, the procedure for conducting and terminating the transaction of which should be prescribed in the rules of the trading platform.

For example, on EBAY, a deal can be terminated within the first hour after the conclusion of the deal - the money will be returned immediately, no pen alties. If for some reason it was not possible to do this, you can agree with the seller to terminate the transaction and return the money, but this is possible only in the first 10 days after the conclusion of the transaction and only at the good will and desire of the seller.

Other venues may have different rules. Therefore, before taking part in the auction, you must carefully read the rules.