A sham bidder is a person who participates in an auction with the intent to artificially increase the bidding price. This practice is typically done to benefit the property owner or another party interested in the sale. The sham bidder, often referred to as a puffer, aims to create the illusion of heightened interest among genuine buyers, potentially leading to a higher final sale price.
The term "sham bidder" is primarily relevant in the context of auction law and real estate transactions. It raises legal concerns regarding fair bidding practices and transparency in auctions. Engaging a sham bidder can be considered fraudulent and may lead to legal consequences for the owner or the auctioneer. Users can manage related legal documents and procedures through tools like US Legal Forms, which provide templates drafted by qualified attorneys.
Here are a couple of examples of abatement:
Example 1: An auctioneer is hired to sell a property and employs a sham bidder to place bids that are not genuine. This action misleads real bidders into believing there is more competition than there actually is.
Example 2: A property owner secretly instructs a friend to bid on their property at an auction, knowing that the friend will not actually purchase it. This is done to drive up the price (hypothetical example).
Examples of state differences (not exhaustive):
| State | Legal Stance on Sham Bidding |
|---|---|
| California | Strict laws against fraudulent bidding practices. |
| New York | Prohibits collusion in auction settings. |
| Texas | Regulations in place to ensure fair bidding. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Sham Bidder | A person who bids to inflate prices without intent to purchase. | Specifically aims to deceive genuine bidders. |
| Puffer | Another term for a sham bidder. | Interchangeable with "sham bidder"; same intent. |
| Legitimate Bidder | A person who bids with the intention to buy. | Has genuine interest in purchasing the item. |
If you suspect that sham bidding is occurring in an auction you are participating in, consider the following steps:
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| Attribute | Details |
|---|---|
| Typical Fees | Varies by auction house and location. |
| Jurisdiction | Varies by state; generally governed by state auction laws. |
| Possible Penalties | Legal action, fines, or disqualification from future auctions. |
A sham bidder's role is to create false competition at an auction, driving up the price without genuine intent to purchase.