It’s hard to think of anything auctioneers don’t sell, quite frankly.
Further, real property (particularly land) is sometimes put up in an “open combination bidding” format where bidders can buy any one parcel, any combination of multiple parcels, or the entire offering.
Some auctioneers have taken this type of open combination bidding (or the like) and applied it to less significant assets — even an outdated lathe and various components, for example.
Let’s say an auctioneer has this old lathe, and various bits and chucks which work with this lathe as well as other similar models. Some bidders are inquiring if the lathe and all the accessories are going to be sold together while other bidders seem interested in the lathe by itself and/or the components individually.
Looking at this lathe and components, it’s reasonable that someone might want just the lathe, someone might want some or all of the components, and someone might want the lathe with all the components. And, the seller wants only one thing — to maximize price.
It seems to us that an auctioneer would have these choices when selling this lathe and components:
- Sell the lathe and all components together
- Sell the lathe first, then the components
- Sell the components first, then the lathe
- Sell choice — the high bidder can take the lathe, components or both
- Take bids on the lathe, then take bids on the components and add those bids together; then, see if anyone wants to bid more for the “lathe with components”
Besides that insignificant property such as this old lathe and components are of little demand these days — maybe no more than $100 for the lathe; maybe $50 for the components — which method of selling maximizes the seller’s position?
That question is somewhat difficult to answer. Is there more demand for the lathe/components in entirety or separate? How much competition will there be for the lathe? How much contention for the components? Will any particular method of sale discourage bidding in some way? What method will encourage the most bidding?
It’s indeed likely that the “take bids on the lathe, then take bids on the components and add those bids together …” method will maximize price but the downside is this method takes more time and may be a bit confusing to bidders — and time is money and bidder confusion is generally not a plus.
This particular method is known as the “Iowa Method” where farmland up until the late 1980’s (and to some degree thereafter) was sold by the piece and then together, whichever brought the most money. Computer programs in the 1990’s allowed for the successor to the Iowa Method: open combination bidding.
My advice? Reserve the Iowa Method or open combination bidding for significant assets where there is substantial interest in both the parts and the whole; conversely, for an old lathe and components, the effort it takes to sell this property in any other way than as one lot (particularly in a large auction event) may cost more in time and confusion than it produces in additional money.
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.