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rearviewWhen I first saw it, it seemed odd. It even sounded odd.

If I understand it, “If it doesn’t sell at auction, then we’ll try to sell it at auction?”

I think that’s how I read it …

A certain website (https://www.auctionaftersale.com/) advertises essentially the following:

On average, 30% of lots put up for auction are unsold as the last bid did not reach the reserve price. Out website is a market of lots unsold at auctions. We offer a second chance – thanks to an almost immediate access – to all these lots authenticated and appraised by auction houses.

Of course we understand — a painting (for example) had a reserve bid of $150,000 and bidding only reached $55,000. The painting was unsold and is then offered on this website with a reserve of $80,000.

An intrinsic characteristic of the English-increasing auction is, essentially, “It doesn’t matter where you start, it’s where you finish.”

What’s this aforementioned painting worth? Apparently only about $55,000. And, why didn’t it demand $150,000? Because the painting is not worth $150,000. Is someone going to pay the $80,000 for it?? Possibly, but it’s doubtful.

What would this painting have sold for if it had no minimum bid or reserve originally? It’s likely at least the prior $55,000 bid — and with it selling “absolute” maybe even more than that with increased bidder participation.

Some argue that, for instance, that the prior $55,000 high bidder might have paid $80,000 if there had been another bidder pushing his bid to that level.

In other words, the painting demanded one bid more than the second highest bid — and not necessarily what the painting is really worth, nor what the high bidder was willing to pay.

And this theory has merit — but did the reserve nature of the first auction (and will the second) deter participation, thus decreasing the the number of bidders and thus maybe leave out a more interested second-highest bidder?

For that matter, does the reserve format leave out a potential highest bidder who chooses not to participate — because the seller is not committed to sell regardless?

This “auction after [no] sale” is similar to a Dutch auction. We discussed in more detail here: https://mikebrandlyauctioneer.wordpress.com/2012/12/13/dutch-auctions-the-material-difference/

Shouldn’t the original reserve be the very least the seller is willing to accept? If it was, there would be no need for a second “round” of bidding. That is, except for hoping that one person bids the minimum bid. If two or more are willing to pay that minimum amount, there’s no need for the minimum — and there would be a sale with no need for further marketing efforts.

I wonder how long this site will be providing this service — maybe just as long as certain property has unreasonable reserves. If it sustains, I suppose my questions about it are largely irrelevant.

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, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.