Types of Auctions & How to Choose One For Your Business

When most people think of auctions, they typically picture either live, fast-paced events with an auctioneer calling out bids or silent auctions with people scribbling numbers on a sheet. However, the world of auctions is far more diverse than these two formats. From online auctions to Dutch auctions, there are a variety of approaches that can cater to different business goals and audiences.

For commercial enterprises, understanding the unique advantages of each auction type can make a significant difference. Whether you're looking to move inventory quickly, maximize revenue, or create a competitive bidding environment, choosing the right auction method is crucial to getting the best results for your business.

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Why are there different types of auctions?

Different types of organizations—like small businesses, nonprofits, and real estate agents—all have unique needs when it comes to auctions. For example, small businesses with a loyal local following might thrive in live auctions, where the energy can spark friendly competition. In contrast, nonprofits frequently turn to silent auctions, allowing supporters to browse items at their leisure while mingling, creating a relaxed way to encourage giving.

When choosing an auction format, consider factors like:

• Audience size
• Your target audience’s needs and preferences
• Product availability
• Revenue goals
• Types of available auction items
• Timelines for sale

If you need quick sales, a Dutch auction might be ideal, as prices decrease until a buyer steps up. Nonprofits looking to maximize revenue from high-value items may prefer traditional auctions, where competitive bidding can drive up the final sale price. While some may argue that certain types are more effective for revenue generation, the best approach depends on your organization’s specific needs.

With a white-labeled auction platform like Handbid, you can customize the auction experience to meet your organization’s exact needs. Handbid’s user-friendly interface ensures you have the bidding tools, customization options, and secure payment processing to succeed!

Basic Types of Auctions

Let’s start with the common types of auctions you’ve likely seen before. We’ll break down each type, highlighting its characteristics and use cases to help you find the perfect fit for your next auction event.

English Auctions

English auctions, also known as ascending bid auctions, are probably the most familiar auction format. In this type, bidders openly compete against one another by placing increasingly higher bids until no one is willing to bid higher. The excitement builds as participants try to outbid each other, creating an atmosphere that keeps everyone on the edge of their seats. This format is often used for art, antiques, and real estate, where the competitive spirit can really drive up the final sale price.

One of the main benefits of English auctions is their transparency. Since everyone can see the current highest bid and the other bidders, it builds a sense of trust among participants. This format also tends to generate higher final bids, as bidders are motivated by the competition to go beyond their initial spending limits. 

Additionally, the social aspect of live bidding (whether done in person or online) can enhance the experience, making it not just about the items but also about the thrill of the auction itself.  Businesses can easily host English auctions live, online, or in a hybrid format using intuitive auction software like Handbid.

Dutch Auctions

In a Dutch auction, the price starts high and is gradually lowered until a buyer is willing to accept the current price. Instead of bidders driving the price up, like in a traditional English auction, the seller sets a high initial price and lowers it over time. The first person to agree to the current price wins the item.

This type of auction is especially fast-paced, and the bidding process can feel more intense, as potential buyers must decide quickly whether to jump in before someone else snatches the deal. Because of their speed, Dutch auctions are commonly used in situations where sellers want to move inventory quickly or when there are multiple identical items for sale. 

For example, the U.S. Treasury uses a variation of Dutch auctions to sell government bonds. In the tech world, companies offer shares in initial public offerings (IPOs), helping to find a fair market price quickly. The method is especially useful when sellers want to avoid the drawn-out uncertainty of a traditional auction.

Sealed-Bid Auctions

Also known as a first-price sealed-bid auction, this type of auction involves participants submitting their bids privately, without knowing what others are offering. 

Instead of open bidding, where people raise their hands or shout out amounts, everyone writes down their best offer, typically on a piece of paper or digitally. At the end of the auction, the bids are reviewed, and the highest one wins. This creates an atmosphere of quiet competition, as no one knows if they're bidding too low or too high until the results are announced.

On a larger scale, sealed bid auctions are used for refinancing credit or foreign exchange, though they’re also popular at smaller-scale charity events, fundraising galas, and even in real estate. They’re great when organizers want to encourage people to think about their maximum price without the pressure of open competition. The secrecy element can motivate participants to bid higher, knowing they only have one shot to make their offer count. 

Ultimately, sealed-bid auctions are a more relaxed and discreet alternative to the fast-paced nature of live auctions, but they can still create excitement when the final bids are revealed!

Vickrey Auctions

Also known as a second-price sealed-bid auction, a Vickrey auction is a special type of sealed-bid auction. Participants still submit their bids privately, but the twist here is that the highest bidder wins, but they pay the second-highest bid instead of their own. 

This unique approach encourages bidders to submit their true highest bid, because they know they won’t overpay—they’ll always get the item for a price just below their offer. It eliminates the fear of the "winner's curse" (paying too much), which can happen in other types of auctions.

Vickrey auctions are often used to sell items like art and patents or even to allocate resources in markets like spectrum auctions for telecom companies. This method is especially useful in situations where fairness and transparency are important because it discourages strategic bidding or attempts to game the system. Bidders feel more comfortable putting down an honest bid, knowing they won't end up paying significantly more. 

Real Estate Auction Types

Real estate auctions take some of the same principles we've discussed—like sealed bids and starting high or low—but they have their own twists designed to meet the needs of property buyers and sellers. Whether you're trying to snap up a house quickly or get the best price on a valuable property, real estate auctions offer a range of methods to make that happen. 

Reserve Auctions

A reserve auction is a type of auction where the seller sets a minimum price, called the reserve price, that must be met for the sale to go through. This means that even if someone places the highest bid, the seller isn’t obligated to sell unless that bid meets or exceeds their reserve. 

Essentially, the reserve price acts as a safety net for the seller, ensuring they won’t be forced to part with their item (or property) for less than they’re willing to accept. As the price isn’t disclosed to the buyer, it also gives the seller freedom to change the minimum bid throughout the process. This type of auction creates a balance of urgency for buyers while giving the seller control over the final sale.

Reserve auctions work best when a seller wants to test the market but isn’t in a rush to sell. They’re typically used to sell houses, land, or high-value items like artwork, antiques, or collector’s items, where there’s a risk of the bids coming in too low. By setting a reserve price, sellers can still attract potential buyers with the excitement of an auction but have peace of mind that they won’t walk away with less than what they believe the item is worth.

Absolute Auctions

An absolute auction is a no-holds-barred type of auction where the highest bid wins, no matter what. In this setup, there’s no reserve price or minimum amount the seller must reach—whatever the top bid is at the end is guaranteed to win. 

For buyers, this creates a real sense of excitement and opportunity since they know the property or item will be sold, no matter how high or low the final bid is. Sellers, on the other hand, rely on the competitive nature of the auction to drive up the price.

You might choose an absolute auction when you want a quick sale or to attract a lot of bidders fast. They’re commonly seen in real estate, especially for distressed properties or foreclosures, where the priority is to sell as quickly as possible rather than hold out for a specific price. This type of auction can also be used to generate buzz for high-demand items because the certainty of a sale encourages more participants to jump in. It’s an all-in strategy that works best when speed and guaranteed results are the top priorities.

Minimum Bid Auctions

A minimum bid auction is exactly what it sounds like—an auction where the seller sets a minimum price, and bidding starts from that point. Unlike a reserve auction, where the reserve price is hidden, here the minimum bid is upfront and known to all potential buyers. If no one is willing to bid at least the minimum, the auction doesn’t move forward. This allows sellers to reduce risk since it gives them control over the starting point of the bidding while still allowing the competitive nature of an auction to drive up the price.

These auctions are common in real estate, especially for valuable properties where sellers want to avoid starting too low. However, you might also use a minimum bid auction for artwork, vehicles, or luxury goods to filter out lowball bids. This type of auction helps set clear expectations while still leaving room for bidding excitement to take the price higher.

It’s important not to confuse this type of auction with second chance auctions, also known as fire sales, which often sell items immediately for the starting bid.

Multi-Parcel Auctions

A multi-parcel auction sells multiple properties or parcels of land together, either as individual units or in combination. In this auction, bidders can place bids on individual parcels, multiple parcels, or the entire property, depending on how you structure the auction. 

The goal here is to maximize value by offering flexibility—buyers can focus on the parcels that interest them most, while sellers can attract a wide range of bidders and generate higher total bids. It’s a dynamic process because the final outcome depends on whether the highest value is achieved through individual bids or a combined sale of multiple parcels.

Multi-parcel auctions are commonly used in real estate, especially when selling large tracts of land, farms, or estates that can be easily divided. They’re ideal for situations where different buyers might have different needs—like a developer looking for multiple lots or an individual interested in a specific piece. However, these auctions often take a significant amount of time and involve using a surveyor.

Other Types of Auctions in eCommerce

In the fast-paced world of eCommerce, auctions give buyers the chance to score great deals on everything from rare collectibles to tech gadgets. These online auctions borrow some principles from traditional methods but come with their own twists to fit the digital landscape. 

Double Auctions

A double auction is where buyers and sellers submit bids simultaneously, and the auctioneer matches them to complete transactions. Buyers offer their maximum price, sellers their minimum. This makes the process quick and efficient, ideal for markets with many participants.

Double auctions are common in financial markets like stock exchanges and commodity markets. They’re perfect for environments where many transactions need to be processed quickly, ensuring a fair way to match supply with demand. Due to the fast-paced quality of the auction, bidders should be fully informed about the items’ value before bidding. 

Penny Auctions

In penny auctions, participants pay a small fee (typically one cent) to place bids on items. Each bid increases the auction price by a single cent and extends the auction timer, usually by a few seconds. This creates an engaging and competitive environment, as bidders aim to outlast their opponents while keeping their costs low. Unlike traditional auctions where the highest bidder wins, penny auctions require strategic timing and persistence, making them both exciting and potentially risky.

Penny auctions are a good way to raise revenue, even if the items sell below fair market value. For bidders, the thrill of the auction can sometimes lead to spending more than originally intended. Overall, penny auctions combine elements of gambling and traditional bidding, attracting those looking for bargains and a bit of competitive fun.

Blind Auctions

A blind auction is a type of auction where bidders submit their offers without knowing what others have bid. Bidders can typically see their standing but not the amounts of other bids. Once all the bids are in, the seller reviews them and typically awards the item to the highest bidder. There’s no chance to adjust your bid based on what others are offering, so it’s a game of strategy and guessing how much to bid.

Blind auctions are best for situations when you have large quantities of a single item, or when fairness is key, like government contracts, real estate sales, or art auctions. They also work well in high-stakes scenarios where bidders don’t want to reveal their hand too early and prefer privacy in their bidding.

Wrapping Up

Choosing the right auction type for your business depends on your goals, resources, and what has worked in the past. Whatever your needs, it’s important to match the auction format to your specific objectives.

With Handbid+, you can easily customize and host all kinds of online auctions, from traditional English auctions to multi-parcel auctions. Whether you're selling products, real estate, or services, there's an auction style that fits your business perfectly!

Want to learn more before you make your decision? Explore our other resources for auction planning:

• Second Chance Auctions Turn those unsold items from previous auctions into cash with a fast, easy second chance or fire sale auction
• Build an Auction Website Learn how to make a better impression on customers in a commercial auction by building an auction website.
• Silent Auction Rules Brush up on how to improve trust and participation in a silent auction by laying down fair rules.