Different Types of Auctions

The Different Types of Auctions

Auctions are used as an efficient way of raising funds through the sale of items at the best price possible. The term auction is normally used to refer to the various types of sales (also the types of auctions) in which the price of the item being sold is not set prior to the event or arrived at through negotiation or haggling. Instead, the selling price of the item on auction is determined through a competitive bidding process. Some of the most common types of auctions are live auction, silent auction and online auction. The distinction between these types of auctions comes from the action of the bidders.

Live or Ballroom Auction

It is also called the live on-site auction. This type of auction is usually conducted in a meeting facility or room such as a hotel convention or indoor location meeting facility. Most likely, the interested bidders have already inspected the property being auctioned. Pictures and descriptions of the property on sale may be displayed in the ballroom when the bidding process is officially opened.

The auctioneer in the ballroom auction stands before the audience of bidders and onlookers as he or she calls out the bids and asking for higher bids on the property being sold. This type of auction is said to be transparent because all the bidders compete openly in an open place at the same time. Although a competitive bidding environment usually produces the highest selling price, the winning and the losing bid might not be separated by a big gap because bidders keep observing the behavior of others, which can make the bidding process drag.

Online Auction

During online auctions bidders compete on a particular service or product and submit their bids online or over the internet. Internet auctions have become an important part of electronic commerce because of the flexibility and possibilities they provide.

In this type of auction, the property is put on sale on the internet. Therefore, there are no on-site bidders. Typical sale of the property on sale is conducted over computers connected to the internet. Auctions done on the internet have specific timelines (opening and closing dates), and sometimes with fixed increments of bids. Bidders enter their bids against other competing bidders on the internet for the same item. Sometimes, proxy bids are used when a bidder would like to set a predetermined highest bid he or she can make.

Sealed Bid Auction

This type of auction is used where confidential bids are preferred. The submitted bids are opened at a place and time that were predetermined earlier on before the auction process commenced. In the event that the seller is considering optional terms of sale, sealed auctions are usually chosen. Also, when there is more than just one item or service in the same auction, all coming as one bundle or assemblage, the auctioneer may choose to use sealed auctions so that each bidder can determine the best combinations that meet their own needs to bid on.

The Best Type of Auction

When selecting the type of auction to use in your business, you ought to consider the merits and demerits of each type of bid. Whereas ballroom auctions are one of the traditional types of auctions, it limits you to bidders who can make it to the venue of the property being sold. It also involves a lot of logistics such as hiring a venue, which prove to be expensive.

Sealed bid auctions may not be the best because they lack the competitive aspect that auctions are meant to have. As a seller, you do not stand to benefit from the best winning bid amount because bidders do not really compete for the property you are selling.

On the other hand, online auctions have proven to be the best because as an auctioneer, you have access to a global market regardless of your physical location. Mutual trust and transparency is also established in online auctions, making it easy to regulate underpricing and overpricing. Online auction can be varied in many ways, making it the most advantageous mode of selling.