Dutch Auction

A Dutch auction has two meanings, depending on how far back you go. Originally, a Dutch auction related to an auction occurring in reverse. This meant an offer price was announced by the auctioneer to begin the auction process. They would then gradually reduce that price until a bid was made.

However, this original meaning has now been lost. Today, a Dutch auction refers to an informal bidding process. Typically, two or more potential buyers are trying to outbid each other to attain the same property. This is better for the seller, as it means there is more interest in the property. Therefore, they are far more likely to achieve a higher price for it.

Very often, this type of auction requires that each would-be purchaser writes their offer for the property on a piece of paper. This is then placed in an envelope and sealed, before being passed to the estate agent. There is usually a deadline for doing this; any offers received after the time and date previously given would be excluded from the process. The estate agent then opens the offers and the seller would choose the highest one to get the best price for the sale.

As such, the modern meaning for the term Dutch auction is almost the exact opposite of what it used to be. These auctions are not commonly used in the property market, although there are scenarios where they can result in a quicker sale for more money than would otherwise have been possible.