Close-up view of man and woman making account of family income. Writing down and calculating expenses. Attentive review of finance. Calculator on desk. Economy concept
Bidding on a high-ticket item at an auction is thrilling. You’re competing with a few other participants as the dollar amount climbs ever higher. Soon, it’s just you and one other bidder. The price is beginning to exceed what you’re comfortable paying, but you can’t help it—you continue outbidding the other person until they finally concede the win to you.
But when the hammer falls, reality sets in, and you realize you actually have to pay. What if you change your mind or truly can’t afford to buy an item you won in an auction? Here’s what you need to know.
The Problem of Failed Bids
While many auction houses prefer not to publicize them, non-paying auction winners are a significant problem. Incidents have been on the rise as online auctions grow in popularity. After all, it’s difficult to research and vet every bidder who wants to participate in an online auction. It’s easy to remain anonymous online, and bidders are just one click away from deciding they don’t want to pay the agreed price.
Yes, auction houses require deposits, references, and bidding contracts, but there’s still plenty of room for bidders to retract their offers. The only way to correct the problem of non-paying bidders is to force them to attend in person and pay immediately with cash before leaving the premise. But this would mean stepping away from the online auction market, where a huge percentage of bidders like to participate.
Most auction houses choose not to pursue complicated, expensive, and time-consuming lawsuits, so failed bid cases rarely end up in court. Instead, unpaid items are usually returned to the original consignor, put into a future auction, or sold privately. Often, these backup plans result in a significant loss for the seller—and the winning bidder is obligated to make it up to them.
Consequences for Failing to Pay a Winning Bid
If you win something at an auction, you are legally bound to pay the agreed price once the hammer falls. You’re liable for the deposit on auction day and the rest of the purchase price, plus fees, by the completion deadline (typically 28 days after the auction).
If you can’t pay the deposit, you may face legal consequences. The auction house and seller can demand that you pay the amount specified in your contract. It’s hard to fend off this demand, considering that you already agreed to the terms simply by participating in the auction.
If you can’t pay the remaining purchase price by the completion date, you may be served with a Notice to Complete. This legal document demands that you complete the purchase within a given time frame, typically 10 business days.
If the deadline comes and goes, you’ll most certainly lose your deposit. You may also face financial penalties, including having to pay the seller for damages. These penalties stem from the following costs:
- The seller may incur more fees for having to sell the item again.
- It may cost the seller more to hold onto the item while waiting for it to sell.
- The item may depreciate in value after you agree to purchase it.
- The seller risks a lower winning bid the second time around.
Depending on the terms of your auction contract, you may have to cover these costs if you attempt to back out of your winning bid. You may even be charged interest every day until the item sells to someone else.
What to Do If You Win an Auction and Can’t Pay
Clearly, it can be incredibly costly not to complete an auction purchase. Even so, some buyers see an item they want at auction and bid before their finances are in order, hoping to get the money they need before the completion date. This is a risky strategy because if the finances don’t materialize, the bidder will be unable to pay.
So before you raise your hand to bid at an auction, make sure you have enough money to pay and that you really want the item for sale. If it’s too late and you’re already committed to an auction purchase you can’t pay for, here’s what you can do:
- Demand to get out of the auction contract based on proof that the auction house or seller misrepresented the item, and that’s why you bid on it. Challenging the premise of the sale can be complicated, so be sure to consult a lawyer.
- Arrange short-term financing. This way, you can complete the purchase and decide what to do next without facing the fees and penalties associated with breaking an auction contract.
- Try taking the item back. Auction houses are typically willing to repurchase items from bidders now facing buyer’s remorse. Just be prepared to receive an offer below your winning bid.
- Request that the item be put in a future auction. This is the best way to recover a similar amount to what you paid for the item. And who knows? The value may go up in the meantime, increasing the chance of the winning bid being higher than what you paid.
- Wait it out and see what happens, especially if the item is likely to appreciate. In this way, a bad bid today could end up providing a good return on investment later on.
- Learn from your mistake and vow never again to bid on something you can’t afford or don’t really want.
Bid at an Auction in Oklahoma City
Dakil Auctioneers, Inc. is Oklahoma’s premiere, full-service auction company. We specialize in heavy equipment, real estate, cars, guns, and many other types of auctions. Whether you’re a regular auction attendee or a newcomer on the scene, we invite you to check our upcoming auctions page to stay informed. You can also contact us at (405) 751-6179 for more information about selling your items at an auction.
FAQs
You're liable for the deposit on auction day and the rest of the purchase price, plus fees, by the completion deadline (typically 28 days after the auction). If you can't pay the deposit, you may face legal consequences. The auction house and seller can demand that you pay the amount specified in your contract.
What if the highest bidder doesn't pay? ›
In the end, it is up to the Organization running the auction to decide whether to honor the request. If the winning bidder would like to back out after the close of the auction, you can offer the item to the next highest bidder, or close the item as Not Sold.
Can you back out of an auction after winning? ›
If the auction has ended and you don't want the item, you can message the Seller and request that they cancel the sale. If you win an auction and don't pay, the Seller will file a complaint against you; so, it's better to communicate.
How long does a buyer have to pay after winning an auction? ›
As of 2022, eBay has rolled out a new rule that states all unpaid items must be settled within four days from the time that the buyer has finalized the order or has won the auction. Therefore, a buyer must pay for the sold items within that period.
What happens if you change your mind after winning an auction? ›
When the hammer falls in an auction room, it represents an exchange of a binding contract between the seller and the buyer. It is too late for either party to change their minds, and the sale is required to proceed in accordance with the contractual terms and at the price that was concluded when the hammer fell.
What happens if you win an auction but can't pay? ›
If you can't pay the remaining purchase price by the completion date, you may be served with a Notice to Complete. This legal document demands that you complete the purchase within a given time frame, typically 10 business days. If the deadline comes and goes, you'll most certainly lose your deposit.
What happens to non paying bidders? ›
When a seller cancels an order because the buyer hasn't paid, the unpaid cancellation is recorded on the buyer's account. Buyers who have excessive unpaid cancellations may have limits imposed by a seller or by eBay, or lose their buying privileges.
Are auction bids legally binding? ›
Your Bid or Purchase is a Contract
When you place a bid on an online auction item, you enter into a legally binding contract to purchase the item from the seller if you are the winning bidder. You are the winning bidder if your bid is the highest bid at Auction Close and your bid is accepted by the seller.
Can seller cancel auction after I won? ›
One cannot always tell from the sold or completed item history, if the seller's items being relisted was because they cancelled an auction, or their buyer(s) did not pay, that too happens. A seller cancelling a won auction is not legal by ebay rules or by law.
How do I get out of an auction purchase? ›
In most cases you cannot get out of an auction contract. However, if misrepresentations or misleading statements have been made by the auction house, seller, or seller's solicitor then you may have a legal claim against them.
By bidding on an item, you obligate yourself to pay for the item if you win it, even if you decide you no longer want it. Only bid on items you are serious about purchasing.
How long do you have to pay after winning an auction? ›
Usually a 28-Day Completion Deadline
Traditional auctions then have a standard deadline of 28 days. You'll have to pay the remainder of the funds by this date.
Do you get your money back if you lose an auction? ›
If you do not win the auction, the bank will refund your transaction. If you don't receive the refund from your bank, please contact them. Typically it happens relatively quickly (two days) but depending on your bank it may take as many as 45 days in some cases.
Can you back out after winning an auction? ›
It is important to note that the terms are fixed and there is no cooling-off period when you buy at auction, so there is no option for a change of mind once the winning bid has been placed. For that reason, we strongly recommend obtaining legal advice prior to the auction where possible.
What should you not do at an auction? ›
Avoid talking loudly or disrupting the bidding process. If you need to leave the room, do so quietly and without disturbing others. Don't bid on items you're not interested in: It can be tempting to bid on multiple items just for the thrill of the auction, but this can quickly lead to overspending and regret.
Why do people overbid at auctions? ›
8. In auctions, for any given value received, the bidder chooses his optimal bid by trading off the probability of winning (increasing with higher bids) with lower profits if a win occurs. In the trade-off, risk-averse bidders are willing to receive less profit in order to be more certain of a win, hence, overbidding.
What happens if you are the highest bidder but the reserve isn t met? ›
If the reserve hasn't been met and you are the current high bidder at $1700 it means that although your bid stands at that amount, it still hasn't reach the level of the reserve placed on the item by the seller. Thus even if the auction ends now, you would not win.
How do I report a non paying bidder? ›
If you click the drop down box at the end of your listing you will find an option to click Open Unpaid item dispute. Once open, the buyer has a couple days to pay and if they do not-you go back and close it.
Do sellers have to accept the highest bid? ›
Because an offer to buy at the list price with no contingencies addresses only two of the matters that buyers and sellers need to agree on, sellers are free to counter a "perfect" offer or even reject it for any non-discriminatory reason.
What to do when someone wins a bid on eBay but doesn't pay? ›
If, after receiving the invoice, the buyer has still not paid, you can cancel the order after 4 calendar days and up to 30 days after the order is placed. You can also make an offer to the next highest bidder in the Auction. Use the Cancel order button and select the Buyer hasn't paid option from the drop-down menu.
