A liquidation auction is technically an auction at which goods of a liquidated company are sold with the goal of raising enough funds to satisfy creditors. People may also use the term “liquidation auction” to refer to a surplus auction or to other types of auctions, such as government car auctions. The term is used in this sense to imply that everything must go, with the goal of clearing all of the stock, whether or not the business is closing.
In the case of a closing business, the liquidation auction is one of the steps in the closure. Businesses can voluntarily liquidate or be forced to do so, with the auction being managed by an auction house. As a general rule, funds from the auction go to creditors first, and then are divided among shareholders. The liquidation includes stock, such as goods the company was selling, along with things like office furniture and supplies; essentially, anything the company has which is of value will be sold at a liquidation auction. Sometimes, high value items such as corporate art will be auctioned separately.
Attending a liquidation auction can be an excellent way to get good deals on goods, products, furniture, and so forth. However, people should be careful. The auction may not allow inspection ahead of time, making it difficult to know if something is a good buy or not, and returns are not accepted, so attendees should make sure that they are positive about a purchase before committing by bidding.
It also sometimes possible for prices to be driven artificially high because there is widespread public interest in the company and the auction; when a prominent company goes bankrupt and a liquidation auction is held, people may buy at the auction to pick up souvenirs, and thus they may assign higher value to goods in the auction.
Usually a liquidation auction is advertised in a newspaper of record to give people notice. It’s also possible to get on mailing lists which announce auctions, or to sign up with a specific auction house to be notified when auctions are going to be held. Sometimes advance notice also comes with an invitation to a preview event at which people will be allowed to inspect items which are included in the option. This can give people an opportunity to get an idea of what is in the auction, and to identify pieces of particular interest.