Auctions require bidders. Bidders are often required to register in order to get a bid number, allowing them to participate. The easier auctioneers make it to participate, the more bidders will — given they have an interest in the subject property and/or the auction event.
Sometimes auctioneers charge a fee to register for an auction. For instance, to obtain a bid card, the bidder must provide identification, phone number and some sort of fee ($5, $25, $100, $1,000, $10,000 …) This fee is often applied to any purchases and/or refunded if no purchases are made; alternately it can be kept by the auctioneer/seller as income. Today, we explore why an auctioneer would charge a fee to register for an auction.
Basically, a “cost to register” satisfies one of several objectives:
- Gauge good faith or ability to perform
- Limit entry and/or participation
- For additional service, benefits, perks
- Lessen expense or additional profit
Exploring these aforementioned reasons further …
- Gauge good faith or ability to perform: For example, an auctioneer is selling collector cars valued in the $50,000 to $250,000 range. It is likely reasonable that someone without at least $1,000 in ready cash would not be in a position to buy any of these cars in this auction, so a $1,000 registration fee helps to gauge ability to perform — pay.
- Limit entry and/or participation: Let’s say an auction is taking place of a longtime prominent resident of a small town. The auction is taking place in a small home with limited parking and facilities. Given the auctioneer is expecting many “lookers” who intend to just look around — rather than buy — he decides to charge a fee to enter to limit participation to those interested in buying, rather than just looking.
- For additional service, benefits, perks: Some auctioneers provide additional extras to those who choose to pay an entrance fee for services such as preferred seating, food, drinks and/or “backroom access” and the like. These essentially-VIP bidders receive more and are willing to pay for it.
- Lessen expense or additional profit: A few auctioneers and/or auction companies charge a fee as basically a profit center to keep and/or use for expenses. In some cases, this fee is considered nominal, but in the long run can create meaningful income. Others use an entrance fee to obtain a bid paddle, secure a chair, etc. for example, and is refunded if returned, or retained if kept, discarded or not returned. This type of entry fee allows the auctioneer to mitigate incidental expenses.
Of course, does it cost to register [as in participate] in an auction otherwise? Sure it does. For a live auction there is finding the auction, driving there, parking, walking, standing, food, time away, etc. And for an online auction, the barrier to entry is comprised of much less “friction” which we’ve discussed before including here: https://mikebrandlyauctioneer.wordpress.com/2014/12/24/our-frictionless-auction-environment/
Does it cost to register for an auction? Maybe, and potential bidders should be advised prior what — if any — [additional] charges there will be to participate. Further, if you are an auctioneer, know that many auctions across the United States every day charge some monetary amount to enter and/or sign up.
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, an Instructor at the National Auctioneers Association’s Designation Academy and Faculty at the Certified Auctioneers Institute held at Indiana University.