Smythe's Lunch Talks

Auction Mechanics

Mary K. Herzog

May 3, 2006

Introduction

Buying at auction can be a very satisfying experience. A key piece that you have been searching for suddenly turns up and you have the opportunity to acquire it. You feel good about buying it at auction, because you realize that the bidders will set the price, not an arbitrary seller. There can be pitfalls, however. The auction house could have mis-described the item. The item might sell for way over your budget. Your bids might be lost in the mail and not executed! Hopefully this presentation will prepare you for an optimal auction experience.

Questions to Ask an Auction House before Bidding

What is the buyer's premium?

The buyers' premium is the added commission, or fee, that auction houses typically add to invoices for administrative costs. It can vary widely and it is important to factor in that percentage when you are determining how much to bid on an item.

What kind of Payment Do They Accept and When Is Payment Expected?

Some auction houses accept credit cards for payment, others do not and prefer personal checks. If you plan to bid a large sum, you should check with the credit department before you bid to be certain they are comfortable with your references. Some houses do exhaustive credit checks, others will call one or two contacts.  Depending on your relationship with the auction house, you may be able to receive your items before paying for them. It is important to know when your payment is expected. Some houses give a month interest free; others allow only 10 days before interest is added. It is also very important to make sure your finances are in order before you place a legally binding bid. Bidders must not renege on their purchases, but when they occasionally do, they become persona non grata. Auction houses have long memories and will delete folks from their catalog mailing lists and place a big "X" by their names!

Return Privilege

This is an important question to ask of an auction house, as you might need to return something and find that you do not have that option. Smythe's standard policy for returning an item is that if you viewed it prior to buying it, you cannot return it unless it is found to be non-authentic. If you did not view it, you can return it for reasons of condition only. For example, if a paper item was not photographed in the catalog, you did not view it, and the catalog description did not say there was a corner torn off, you would be disappointed and not want to keep the item. Another little known fact is that auction houses usually don't let you return one item out of a group lot; you have to either keep the entire group or return the entire group. Be aware that third party graded material may not be returnable. Returns must be made promptly, as the auction house has an obligation to pay the consignors in a short time frame, and they will certainly not be pleased to accept a return if it is many months past the sale date.

Tax and Other Charges

Unless you have a resale number indicating that you are a dealer, you will be charged sales tax. You should take sales tax and any other charges, such as shipping and insurance, into account before bidding because they will be added to your invoice. You should also inquire about sales tax reciprocity. For example, if you bid in a NY auction and have a NJ resale you will not be charged sales tax because NY has a reciprocal sales tax arrangement with NJ.

What to Expect At the Auction

Catalog/Lot Viewing

In most cases, the auction house will mail a printed copy of the catalog to subscribers at least 3 weeks prior to the sale date. Some houses will also put the catalog up on their website. Read the catalog carefully, especially the Terms of Sale page, as it is generally the best source for information regarding the items for sale. Estimates are only that, and realized prices can fluctuate greatly from printed estimates. Most auction houses provide a period for prospective bidders to view the material in the auction. It is wise to call and make an appointment before arriving to view material, as the auction house may have many people wishing to view at once. To make the process go faster, it is helpful if you have a good idea of which lots you want to see before arriving. If you cannot view the material in person, some auction houses will ship material to their better clients for inspection. If this is not possible, you can usually request a more detailed scan of an item or a fuller description.

Registration/Mail & Internet Bids

There are many ways to bid at auction. You can come in person, register for a bidding number, and bid on your own behalf. When registering for a bidding number, (a "paddle") write legibly and fill in all requested information. If you are having someone bid as your agent, you must understand that the agent is responsible for signing "as agent" and that they will be held accountable for their clients. You can submit an absentee bid, which means that the auction house will bid on your behalf. You should remember to get the bid to the auction house in a timely fashion and to keep a copy for your records. You can "bid a limit", which means asking the auction house to bid on your behalf up to a set limit. Make sure that the limit is clearly indicated. If you submit an absentee bid specifying "either / or", as in you would like either one or the other, but not both, make that as clear as possible. Many houses will not accept bids that are a certain percentage below the low estimate, so make sure to note the minimum acceptable bids before considering your bid. Keep in mind that several folks have to read and enter the data that you enter on the bid sheet. This means that writing legibly will garner better results! If you phone your absentee bids into the auction house, ask the operator to read the bids back to you. Sending a written confirmation afterwards will ensure that the correct bids are entered. Submitting bids over the Internet saves a lot of time and can be quicker than mail or fax. It is a good practice to call and check that bids were received, no matter what the submission method.

The Auctioneer

Most houses have a regular auctioneer who conducts the majority of their sales. That person must be licensed in the state he or she is calling the auction and his or her license should be prominently displayed. Listen carefully to the announcements made before the sale starts. Normally, the auctioneer will introduce staff who are assisting at the sale, remind bidders about certain policies that will govern the sale, and ask that cell phones be placed in non-ring modes. Many houses are now recording their sales and, by law, the auctioneer must report that to the audience. As a bidder, it can sometimes take a while to understand the auctioneer's rhythm. It is very important to concentrate and not lose track of what lot is being sold, as houses will rarely re-open a lot that has been sold. Remember that at sale time, the auctioneer's word is final.

Auction Lingo

Most houses will have assembled a great number of absentee bids prior to sale time. These bids are compiled into a print-out called "The Book". A staff member will bid on behalf of all these absentee bidders. When an item sells to "The Book" (also called "The Order"), it is actually being sold to an absentee bidder. It sometimes happens that the winning bid will be a tie. In this case, the lot will go the "Book" bidder, because that bid was received first. It is occasionally unclear who the winning bidder is in the event of a tie. Remember that if you are present at the auction, you will only win a tie bid if you go one increment over the"Book" bidder. If an item is sold to a floor or phone bidder, the bidder number will be called out, as well as the winning bid, or "hammer" price. If a lot is "passed," it has not been sold. It sometimes happens that, during lot viewing, an item in the sale is found to be problematic. In those instances, the auction house will remove that item from the sale and announce that the lot is "withdrawn".

Telephone Bidding

Phone bidding has become increasingly popular. It is a way for absentee bidders to feel as if they are in the auction room and to participate in real time. Telephone bidding should be arranged several days in advance, as the auction house needs to ensure that it has sufficient phone lines and operators to handle demand. Requesting a phone line one hour before the sale is scheduled to start will not engender good will. Other pitfalls of phone bidding are: using an unreliable cell phone; trying to bid by cell phone from an amusement park; asking to be called and then not being at the specified number; not knowing how much you want to bid and slowing down the sale. This last point is key. Auction houses have a responsibility to the bidders who have actually shown up in person to conduct the sale in an efficient manner. Phone bidders who are not able to give immediate instructions may miss their chance to bid and are not likely to get a phone line again.

How to Bid

Some folks will pre-arrange bidding signals (touching the nose, tapping a pen, raising an eyebrow) with the auctioneer in order to disguise the fact that they are actively bidding. This is done so that their identity is concealed and other bidders cannot "run the price up". Most bidders simply use their hand or bidding number card to indicate interest in an item. Some bidders will attempt to employ bidding tactics, such as "cutting" the bid, which means bidding one-half of the normal increment made. This can be successful, but it usually means that the bidder who has used a "cut bid" cannot bid again on that lot. Some bidders will "jump" the bid, especially on items they feel are undervalued by the auction house. For example, if an item is estimated at a low amount in the catalog, but many bidders are interested in it, one bidder might "jump" the bid significantly in order to weed out competition and or intimidate other bidders. If for some reason you are bidding and the auctioneer is not seeing you, it is reasonable to shout "bid" as a way to get your bid noticed.

After the Sale

Some houses allow you to pay immediately and pick up your winning items as soon as you have finished bidding. This is a very nice service as it allows you to complete the bidding/auction process and take your items home immediately. Many houses have a waiting period before pick up is available. If you leave the auction house after bidding but do not pay then, you will be invoiced within a short time. After submitting payment, your items will be shipped. If you have a preferred shipping method, you can include instructions with your payment. For example, some houses ship Federal Express unless otherwise advised. If you have a post office box, they will probably ship registered mail. If your package arrives and it is damaged or has incorrect contents, call the auction house immediately. If all is well with the package then you can relax and enjoy the excitement of your auction experience!