What is an Auction?
An auction is a process of buying and selling goods, assets or products by offering them up for bid, subsequently taking those bids and then selling the underlying item to the party with the highest bid.
In general economics, an auction refers to any mechanism or market where exchange is initiated through the establishment of a bid-type structure, meaning a good is transferred in a tangible market-setting, to the respective individual who bids the highest for the underlying good.
There are a number of variations on the basic auction format, including the establishment of time limits, minimum or maximum bid amounts and special rules for determining the actual sales price as well as the winning bidder. For the sake of clarity, this article will focus on repossession auctions.
What is Repossession?
In most instances, the term ‘repossession” refers to an act where a financial institution or lender takes back an object or asset that was either used as collateral, rented, leased or finance in a transaction.
Repossession, or repo, is a type of action where the party who possesses the right of ownership over the underlying property or asset in question takes the property back from the individual or business who assumed the right of possession. The act of repossessing an item is typically instituted when the party possessing the property fails to meet the repayment obligations outlined in the initial purchasing agreement.
For example, if you were to finance or lease a car and agreed to the monthly payments, which are set at a fixed rate, but failed to meet the repayment schedule, the dealership or manufacturer of the automobile would come to your place of residence or employment and take the car back.
That being said, repossession is typically not undertaken if the borrower or party who has the right of possession misses one payment, however, if the party habitually fails to pay-off the item, the lending institution or owner of the asset will usurp the underlying good.
What is a Repossession Auction?
Using the above paragraphs as a general frame of reference, a repossession auction is a type of auction where the property for sale has been previously possessed or usurped by law enforcement agencies. A repossession auction is a type of demand auction where a group of buyers (generic consumers) will bid on a series of items being sold by a third party.
The items up for bid are repossessed from lenders who failed to meet their payment obligations; additionally, the items in a repossession auction can come from a local police enforcement who previously obtained the items from a criminal party.