Legal Definitions - without reserve

Without Reserve

In the context of an auction, the term without reserve means that the item being offered for sale will be sold to the highest bidder, regardless of the final bid amount. There is no minimum price, often called a "reserve price," that must be met for the sale to be valid. Once an item is advertised or announced as being sold "without reserve," the seller is legally obligated to complete the sale to the person who submits the highest bid.

Here are a few examples to illustrate this concept:

• Example 1: Art Gallery Liquidation

  An art gallery decides to close its doors and liquidates its entire collection through an auction advertised as "without reserve." A rare painting, originally valued at $20,000, receives a highest bid of only $1,500. Because the auction was held without reserve, the gallery is legally bound to sell the painting to that bidder for $1,500, even though it's far below its estimated value.

• Example 2: Foreclosed Property Sale

  A bank is auctioning off a foreclosed commercial property and lists it as an "absolute auction," which is another way of saying without reserve. The bank's goal is to recover some of its losses quickly. On auction day, the highest bid for the property, which had an appraised value of $500,000, comes in at $280,000. Despite the significantly lower price, the bank must sell the property to the highest bidder because it was offered without reserve.

• Example 3: Vintage Car Collection

  A private collector decides to sell off a portion of their vintage car collection through an online auction, explicitly stating that the cars are being sold without reserve to ensure a quick sale. One particular classic car, a rare model from the 1960s, attracts a final bid of $45,000. While the seller might have hoped for a higher price, by offering the car without reserve, they are committed to selling it to the highest bidder for $45,000.