If you wish
to be added to our AUCTION PROPERTY ALERT E-mail List,
receive email property alerts before they even appear in print
WHAT IS YOUR STAND ON SHILL
WHAT HAVE YOU DONE TO ENSURE IT DOESN'T HAPPEN AT
Shill bidding is defined as the utilization of a "plant," or a
non-good-faith bidder (commonly referred to as a "shill," a
"capper," or a "booster,") whose sole purpose is to
artificially inflate the bid
and who has no
intention of buying the property. Only two parties
have a vested interest in shill bidding: the
seller and/or auctioneer.
Auction Sells Fast views shill bidding as
despicable, dishonest, unethical
a source of justifiable scorn on the part of the bidding public
toward the auction industry.
To illustrate how tempting shill bidding can be for an
auctioneer, suppose a real estate property being auctioned
has a reserve (the minimum the seller will accept) of
$500,000, and the bidding is at $460,000
with a 10% buyer's premium and the legitimate bidding has
completely stalled. Factoring in the 10% buyer's premium,
the contract price is $506,000 ($460,000 x 1.10),
which IS ENOUGH to meet the reserve of the seller. The
only problem for the auctioneer is that would mean having to
collapse his/her commission from $46,000 down to $6,000.
Suppose, however, that a shill bid is utilized to get the bid
from $460,000 to $480,000, with the hope of getting the
legitimate bidder "back in" at $500,000.
If the ploy works, the contract price becomes $550,000
($500,000 x 1.10),
which means the auctioneer's
commission SKYROCKETS from $6,000 to $50,000!!!
That's EXACTLY what may motivate
an auctioneer to engage in this practice. When an
auctioneer gets within striking range of the reserve (i.e.
within the buyer's premium range), he/she has reached "pay
dirt territory," meaning that everything obtained
from that point forward until the reserve is met is essentially
coming to him/her!!! What's the downside?
Unfortunately, in Louisiana, not much. Shill bidding is
presently punishable only to the tune of a misdemeanor conviction (which most DAs won't
likely pursue due to the time and energy required to get a shill
conviction) and a $500 fine!!
We at ASF will NEVER,
and we do mean NEVER
be tolerant of shill bidding. We will
STEADFASTLY REFUSE to accept a listing
by any prospective seller who suggests shills be deployed.
Obviously, we make our promise to you that we will
NEVER knowingly allow
a shill bid to transpire at one of our auctions.
Beyond that, however, we have taken another important step to
help ensure the bidding public is not subjected to this
We've modified BOTH our
listing agreement and our
purchase agreement to
the issue of shill bidding.
In our listing agreement sellers
attest, in writing, that shill bidding is prohibited.
The agreement also contains language that states the following:
1. If a cause of action (i.e. lawsuit) arises alleging
shill bidding has been utilized to artificially inflate the bid
and a court deems that in fact shill bidding was used for that
The responsibility for
payment of the FULL buyer's premium
shifts away from the purchaser and to the party the court deems to have
engaged in shill bidding.
Our purchase agreement contains the same language, and we
call this our "No Shill Guarantee"
We are proud to implement it as a means to help assure bidders
at our auctions that, under NO circumstances, will we be
tolerant of shill bidding!!
<SM> The phrases "No
Shill Guarantee," "No
Booster Guarantee," and "No
are all service marks registered to Auction Sells Fast by the
Louisiana Secretary of State's Office.
At the Louisiana Auctioneer's Association
(LAA) 2010 Convention, a resolution was proposed to vigorously
oppose a bill (HB 1439) calling for significantly stiffer
penalties for shill bidding. The LAA membership voted
27-1 (with 4
abstentions) in favor of the resolution. Soon after the
convention, ASF President Rev. Freddie Phillips opted to
resign from the LAA and form a second auction trade association in Louisiana: The
Louisiana Association of Professional Auctioneers (LAPA).
LAPA membership requires signing an oath to adhere to six (6)
fundamental tenets, and # 1 on the list is adamant opposition to
CLICK HERE to view Rev. Phillips LAPA
profile. To view Rev. Phillips' signed LAPA
Also during this same timeframe, Rev. Freddie Phillips,
was one of only two (2) members of the Louisiana Auctioneer's Licensing Board
to support a motion at the May, 2010 LALB meeting to propose a statute to go
before the Louisiana Legislature to increase the maximum
fine for shill bidding for real estate auctions from $500 to
$10,000. ASF's lead bid assistant, Mr.
Robert Burns, was the only other supporter of the motion, and it
by a vote of 5-2.
Interestingly enough, also during that same timeframe, Mr. Steve
Proffitt, Legal Counsel for
J. P. King,
arguably the most dominant real estate auction company in the
world, wrote a SCATHING
article in Auctioneer Magazine
(the official publication of the National Auctioneer's
Association) regarding shill bidding. Here is a brief
quote from Mr. Proffitt's article (Mr. Proffitt gave written
permission for reproduction):
"Auctioneering is no longer the parochial activity that
it largely was 60 years ago. Auction marketing has evolved into
a sophisticated process that is now employed by skilled
professionals to liquidate valuable property of every type.
The old smoke-and-mirrors tricks,
like shill and phantom bidding,
were never lawful and should have never
been tolerated. Today, there is no
room for these crooked practices and Auctioneers and the
industry alike should strongly denounce them and all other
activities that would undercut the legitimacy of the auction
markets. The auction profession can never be stronger than the
public's perception of it and honest practices and ethical
conduct are what the public requires in modern commerce."
Ask the auctioneer at the next auction you attend, "Are you
tolerant of shill bidding?" Then follow that question up
with "What have you specifically done to help ensure it doesn't
transpire?" In doing so, we ask that you play a role in
INSIDIOUS CANCER that we believe
threatens to destroy the auction industry in Louisiana!!