Steamboat Springs The highest bidder in an absolute auction believes the owner of the property falsely advertised the auction and violated general contract laws when the house did not sell.
On July 14, Christian Karch placed the highest bid in the auction for a 3-bedroom house on Blacktail Mountain, but he withdrew the bid after the auctioneer called a break. During the break, Karch said he learned that owner Tom Willman was not willing to sell the assessed $650,000 property at the Karch's high bid of $200,000. Not wanting to tie up the $35,000 he had already paid to enter the auction, Karch said he withdrew the bid to save time and money.
An absolute auction requires no minimum bid and no reserves and guarantees the property will sell when the first bid is made. That promise, Karch said, was made on July 14 when the auctioneer told bidders someone was going to leave that day with the property.
Willman, who opened an auction company in Steamboat last fall, said that the auctioneer took a break 10 minutes into the auction when only five of the nine expected bidders were at the auction. Karch said he and one other bidder were the only ones making bids with the starting bid at $100,000.
In the days after the auction, Willman said if the highest bidder had not withdrawn his bid, he would have "absolutely" sold the house for one-third of its market value.
But Karch and his Realtor, Wayne Ranieri, said Willman told them during the break that he was not going to sell the property for $200,000. Karch said he was concerned that the first and second mortgage Willman had on the house was more than his bid, meaning the property couldn't be sold with a clean title.
"I publicly asked him if he could sell me this with a clean title and he said absolutely not," Karch said. "It was so unprofessional. I thought, 'how could he do it?'''
Cookie Lockhart of Lockhart Auction and Realty Co., who has more than 30 years of experience in the auction business, would not discuss the sale of the Blacktail Mountain home directly. But in general, she said, advertising an absolute auction and not selling it once the first bid is made is against the law.
"It is very, very clear. If you open an auction you have to sell it at an absolute auction," Lockhart said. "This comes from many, many other auctions. You have to sell it if you advertise this way."
She said if the high bidder withdraws an offer, which would most likely happen only if the seller refused to sell, the house should go to the second highest bidder. If the auctioneer and seller felt the number of bidders would not bring a justified price, an auction could be canceled. But, once the opening bid is made, the property had to sell.
She also said that if something is owed on the property, the seller has to disclose that information or be willing to make up the difference.
"You can't sell what you don't own," Lockhart said.
Of the three auction options absolute, subject to confirmation and a minimum bid or reserve an absolute auction has the most risk to the seller. Even in auctions that are truly absolute, meaning there is no minimum bid, Lockhart said she does not advertise them as absolute auctions.
Because of the risk of an absolute auction and the stagnation that can occur with a minimum bid, Lockhart prefers to do auctions that are subject to confirmation.
"The seller has a right to say yes or no," Lockhart said.
Willman said he is happy with the results. And the house that was auctioned three weeks ago is now up for sale.
"The auction was successful in that the power of the seller and the power of the auctioneer was demonstrated," Willman said. "The seller has control in the auction process."
Since the sale, Willman said his property has received interest and he has shown it 10 times. Although not in the multiple listing service, Willman said the property is still on the market.
Willman worked with Colorado Group Realty for six years before leaving the traditional real estate market and starting an auction business last fall. Auctioning real estate property, Willman said, gives power to the seller and guarantees a close date. "When an owner makes the decision to sell a property in a traditional real estate market, you call a broker, list the property, pound signs in the sand and pray for the phones to ring. With an auction experience, you allow the seller to pick the closing date and establish a minimum bid if necessary," he said.
After meeting with a Denver lawyer, Karch and his wife, Laura, decided filing suit against Willman would not be worth their time or money. "Everybody is talking about it, asking why did this guy pull back his bid? Is he stupid?" Karch said. "They didn't waste time like we did. So many hours wasted. We wasted a Saturday morning, wasted the drive over there."