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NewcarlisleMost people in the United States would describe an auction basically the same.

Real or personal property is sold by competitive bidding, with the high bidder becoming the owner.

As such, a typical public auction involves 3 steps:

    1. Seller authorizes property to be sold at auction
    2. Auctioneer offers property for auction
    3. High bidder is awarded title to such property

Yet, some auctioneers and auction houses seem to be doing something else. For instance, their steps maybe number 5, 6 or even 7:

    1. Seller authorizes property to be sold at auction
    2. Auctioneer offers property for auction
    3. Property doesn’t reach desired price and is “passed”
    4. Minimum bid is lowered and property is offered at another auction
    5. Property doesn’t reach desired price and is “passed”
    6. Property is offered for sale at a lower fixed price
    7. Unsold property is returned to seller

In our first 3-step example, things are pretty simple. We have a well prepared and motivated seller and the property is sold to the highest bidder. However, in our second 7-step example, we either have a poorly prepared and unmotivated seller, or auctioneer malpractice — or both.

I’ve often wondered how many fellow auctioneers receive emails or other notices on Facebook or otherwise that, “Reserves have been lowered, and remaining lots are now available?”

So, if I understand correctly, the seller’s prized Rookwood vase could not be sold for less than $1,500 but is now available for the highest bid in excess of $1,000? And if it doesn’t sell this second time, it might be offered again with a $750 reserve?

If it could be sold for one bid over $750, why did the seller/auctioneer ever have a reserve of … ? I’ll submit some ideas:

  • The seller/auctioneer wanted the public to think the vase was worth at least $1,500?
  • The seller actually didn’t want to sell the vase for any less than $1,500, but then changed his mind?
  • The seller and/or auctioneer is woefully out-of-touch with market values?

An obvious next question is, “Why?”

There is an immense amount of data on comparable sales available on the Internet. As well, auctioneers are expected to be experts in properly guiding sellers with this type of information. Lastly, it is selling at auction which means, “It doesn’t matter where you start, but where you finish” — and in fact, “It’s likely the lower you start, the higher you’ll finish.”

There is considerable academic evidence supporting these notions:

Quite frankly, this lowering-the-reserve method more resembles a retail store, where fixed price models incorporate sale prices.

It would appear to me that this type of pseudo-auction damages the auction marketplace overall, suggesting to the public that every reserve could be too high, and that sellers aren’t really serious about selling. Not every seller is suitable for an auction — it seems to me it would be better for these types of sellers (and auctioneers) to avoid selling at auction altogether.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.