In the State of Minnesota the sale of real estate is regulated by the Minnesota Department of Commerce. Specifically, Minnesota Statutes Chapter 82 Real Estate Brokers and Salespersons speaks to the sale of real estate. In Minnesota, auctioneers are allowed to sell real estate at auction without being a licensed real estate salesperson or broker. This power is provided in Minnesota Statutes § 82.23 Exceptions which states in part:
Unless a person is licensed or otherwise required to be licensed under this chapter, the term real estate broker does not include:
…
(h) any person who acts as an auctioneer bonded in conformity with section 330.02, when that person is engaged in the specific performance of duties as an auctioneer, and when that person has been employed to auction real estate by a person licensed under this chapter or when the auctioneer has engaged a licensed attorney to supervise the real estate transaction;
Based on the statute, in the sale of real estate at auction, you are allowed only to engage in the specific performance of duties as auctioneer (i.e. calling bids to find a high bid), and may only do so when employed by a real estate broker or salesperson or the transaction is supervised by an attorney. Any activities beyond this would need licensure as a real estate sales person or broker.
In conjunction with the above, I was recently asked by another state to clarify the state’s position on bidding for the seller. In Minnesota, auctioneers are regulated by the Uniform Commercial Code which has been codified in state law as Minnesota Statutes § 336.2-328 Sale by auction which states in part:
(4) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may either avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.
The statute is very clear that before making or procuring such a bid, notice must be given that liberty for such bidding is reserved. Without notice, there are severe complications. Our company does not bid for the seller in real estate auctions. We present the highest and best offer to the seller, and if not satisfactory, enter into a closed negotiation with the high bidder and the seller. Far too often, we have experienced sellers that prior to auction were firm in their reserve price, but upon the conclusion of the auction are much more willing to accept the high bid even though lower than their reserve price.
In fact, within the past several years there was litigation brought against an auctioneer by a bidder at auction. The auctioneer was bidding on the property on his own behalf without disclosure or notice that liberty for such bidding was reserved. The auctioneer was the high bidder, and purchased the property. However, the back-up bidder won a judgment in excess of $400,000 against the auctioneer for not reserving the right to bid. There are deeper legal implications in a situation where an auctioneer bids on his own behalf at auction (i.e. auctioneer acting as agent for seller, yet buying on his/her own behalf (possibly construed as self dealing)) that I’ll address at a later time.
Simply put, an auctioneer is not required to a be a licensed real estate broker or salesperson in the State of Minnesota. However, to best serve and fully represent his/her client, it is recommend practice that an auctioneer selling real estate in Minnesota be a licensed real estate broker or salesperson.