What Is an Absolute Auction? How It Works and Why Highest Bidder Wins
Auctions are the crème de la crème of the real estate world. But many individuals still aren’t completely aware of how they operate. It begs the question, what is an absolute auction? How does an absolute auction work? And does absolute auction mean highest bid wins? These and more are important answers to know when attending a highest bidder auction. Read on for more information.
Editor’s Note: This is not financial, investment, legal, or real estate advice. Consult with a financial planner, investment specialist, real estate lawyer, and real estate professional before buying or selling land at auction
Characteristics of an Absolute Auction
Those unfamiliar with absolute auctions might have heard of them by another term — no-reserve auctions. These are interchangeable terms and can be used to describe the same auction type.
According to Ranch & Farm Auctions Auctioneer Cody Lowderman, a no-reserve auction means that, when you conduct the auction, the final and best bidder is 100% going to be the new owner of that property or land that you're selling.
This is the exact opposite of how reserve auctions operate, when: “At the end of the day, or when the auction is over, the seller or the party that you're working for, has the right and privilege to look over everything,” Lowderman said. “They can decide if they want to accept the high bid. Or obviously they can reject it.”
In simplest terms, an absolute auction is a sale that does not have a minimum bid or minimum overall sale price. Ultimately, the outcome (including sale prices) of the auction will be accepted as-is, and all property sold at that auction (real estate or personal items) will go to new owners.
It’s important to know, this is a legally binding designation, though. A seller, or auction house, cannot change from an absolute (no-reserve) auction to a reserve auction. The seller has declared they will sell to the highest bidder, and that they must do so.
Oftentimes, reserve auctions start with slightly higher bidding amounts. The same can be true for absolute auctions, but sometimes, it might also start with lower entry bids, perhaps very low. This is a tactic implemented to jumpstart the auction, encourage maximum participation from the crowd, and increase the bidding pool. The bidding rises from there.
As previously noted, the property is guaranteed to sell to the highest bidder. The final sale outcome will go through, no matter how low it might be. That’s the most important characteristic to remember.
Why Buyers Like Absolute Auctions
There are numerous reasons why buyers prefer absolute auctions. First, they know without question that the seller is entirely committed. Before the auction begins, and during the advertising (marketing) phase, the seller, and auction house, makes known if it will be an absolute auction. Once the auction concludes, the seller has no legal right to reject the highest bid. (Because there is no reserve price in place.)
Additionally, sellers can bid at a reserve auction. Oftentimes, they do this to drive up the price or to buy back some or all of the property. In contrast, they cannot do so at an absolute auction. They cannot designate an agent to bid for them, either.
As a result, someone other than the seller will leave the sale with each piece of property sold at that auction (real estate, equipment, personal items, or otherwise). Plus, it’s a clean and simple process. Neither individual tracts nor the entire property can be pulled from the auction. Whoever places the highest winning bid will become the new owner of it.
No-reserve auctions are attractive to buyers because these can potentially give them a chance at a bargain. That said, this element of absolute auctions can attract large crowds, as the definitive nature of the absolute auction drives excitement. It creates urgency among potential buyers. Then, when the auction hammer falls, and the item/property is sold, it’s a legally binding agreement.
“They know that, when going to the auction, that property or land is absolutely going to trade hands,” Lowderman said. “Whoever wins the last bid — they are ultimately the new owner.”
Why Sellers Choose Absolute Auctions
On the surface, a seller might look at an absolute auction and think, why would I ever do that? Of course, there is a possibility a sale could produce a below-market-value outcome. However, that usually doesn’t happen. Even with absolute auctions, the outcomes are almost always positive for the seller.
Why? Because potential buyers know the seller is serious about letting the property go. Because bidders know the seller can’t bid on the property to buy it back, or to drive up the price, they’re more apt to attend. Plus, although unlikely to happen, the possibility of a bargain sparks the interests of many auction goers. This translates to more competition and potentially, higher bids.
Sometimes, sellers must sell, no matter what. Because of the potential bidder interest upside, and perhaps larger crowds, selecting an absolute auction can work in the seller’s favor. Plus, with estate sales, it’s often a no-brainer to use this method.
Another benefit for sellers is that absolute auctions are often sold “as-is.” There are no warranties. The seller does not have to make any repairs. Buyers are responsible for inspections, title searches, repairs, and more.
It’s also less hassle during the sale for the seller. Because everything will sell, they aren’t stuck with keeping up with how much the property has brought. It’s irrelevant as to whether the land will go to the highest bidder, or not, as the absolute auction designation guarantees it will no matter the final price.
“From the seller's standpoint, you have a definite sale, so to speak,” Lowderman said. “You know the sale date — obviously, you know when that's going to happen. Then, most generally, the closing date is 30 days from that.”
All said, this is a highly transparent auction type. Attendees tend to be more upbeat, bidders are more engaged, and the overall atmosphere is strong.
Risks for All Parties Involved
The absolute auction method poses risks to be aware of for sellers and buyers alike. For sellers, although unlikely, it is possible for the ending sale price to be lower than expected or hoped for. While uncommon, it could even drop below market value. For buyers, the sale is “as-is,” meaning a lot of due diligence required by the bidder before the auction takes place. There’s usually no room for contingencies, either.
Fairness for All Parties Involved
The best reason for an absolute auction, and that which outweighs the risks for most, is the aforementioned transparency. On top of that, this fast sale type produces a market-driven sale. Thus, the outcome is highly likely to match the true market value of the real estate selling at auction.
“I think, at the end of the day, putting both sides together incorporates more interest,” Lowderman said. “Obviously, from a buyer’s perspective, you know it's going to sell. And from the seller’s perspective, you do as well. But you're on a timeframe and know — as far as the acceptance of the high bid and the closing date — funds will be collected.”
Study the Auction Terms and Conditions
It’s important for sellers and buyers alike to be completely aware of and familiar with the auction's terms and conditions. This is a set of legally binding rules and regulations that must be followed before, during, and after the sale. Not abiding by these is a serious issue.
Oftentimes, there are other differences between reserve and absolute auctions. One example is the closing timeline. These can be shorter with the latter option.
From the seller’s side, their advertised auction designation is their word. From the buyer’s side, their bid is their word. All parties must follow through. Study the auction terms and conditions before the bidding commences so everyone is on the same page.
For landowners looking to sell at auction, contact Ranch & Farm. We can answer questions and help with your auctioneering needs. For buyers hoping to purchase land, check out some of the upcoming Ranch & Farm auctions near you.
Published on 2025-11-12