These days we see it all the time: “Our auction exceeded all expectations,” or “The auction was twice what we were expecting.” It’s a good headline and it does get attention. People generally like to hire auctioneers who regularly “exceed expectations.” Yet, who’s expectations, and maybe more importantly, when were those expectations actually established?
For example, if I am set to conduct an auction where I expect the gross proceeds to be $75,000,000, and we get $125,000,000, we have indeed exceeded expectations. However, if I hold an auction and generate $125,000,000 and then subsequent tell people I was only expecting $75,000,000 — is that exceeding expectations?
We wrote prior about some notable auction houses [possibly purposely] lowering expectations so that they can exceed them. Much better to exceed expectations versus coming in below expectations — especially if that information is in the public domain: https://mikebrandlyauctioneer.wordpress.com/2010/09/03/are-pre-auction-estimates-purposely-low/.
The other issue here is, when something sells at auction that is well marketed, that’s market value, right? So why was your prior estimate (expectation) lower? Aren’t you cognizant of market values? If this lot sold for more than you sold it for a week ago, maybe you didn’t get market value last time?
Estimates — expectations — appraisals — are opinions. Prices are rather facts, and contrasting/comparing the two is certainly fair game. Yet, if you are consistently exceeding expectations, you need to get better with your pre-auction estimates. Not that you would necessarily want your seller to have high expectations … but your own expectations can and should be reasonable.
We’ve suggested auctioneers be a bit skeptical. When you hear, “We’ve exceeded our expectations” that certainly could be, but there’s more to that story. What’s the context here? Were the prices that much higher, or were the pre-auction estimates purposely low? How often is this auctioneer exceeding genuine expectations?
There is an immense amount of information (real and not-so) on the Internet, and thinking there is no way to value almost anything is misguided. As an auctioneer, you can choose to ignore that data so that you can create your own pre-auction estimates, or actually research prices so that you’re more informed.
Finally, two thoughts: This same data is available to auction bidders/buyers. You estimate a lot at $3,000,000 and bidders see that lots such as this selling for $5,000,000 to $6,000,000 and buy yours for $5,500,000 that’s not exceeding market expectations, but rather in excess of your uninformed expectations.
Lastly, if you keep telling people you are exceeding expectations, you better keep exceeding expectations — as this may constitute in the mind of some sellers that you will [in fact] exceed their expectations as well … and if you don’t, that you didn’t perform up to your promise.
Mike Brandly, Auctioneer, CAI, CAS, 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, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.