If you are new to auctions you may have many questions about them. One of these questions might be “How does an auction work?”. The answer to this question can vary depending on the type of auction that it is.
Let’s start by explaining what an auction is. An auction is where property is sold at a specific time and place to the highest bidder. Most auctions require a person to get a bidder number or other identifying item prior to bidding. When an item you want goes up for bid it will usually start low. The auctioneer will raise the bid amount every time someone bids until there are no more bids on that item. Then they will sell the item for the highest bid. Typically, the items in an auction are sold over the course of several hours. You don’t necessarily have to stay for the entire auction if there’s only one or two items you’re interested in.
There are many types of auctions. Some of the most common are charity, estate, liquidation, consignment, automobile, antiques, coins, storage units, foreclosures, and real estate. All of these can be done as either a live auction, and on-line only auction or a combination of the two.
The Auction Process – Auctions typically have a preview period. This can be on a day before the auction. It may even be only a few hours before the auction starts. The preview gives people a chance to see what is going to be auctioned. It also gives them a chance to look at the item’s condition and make notes.
When buyers arrive at the auction, they have to register in order to bid. If you are a new bidder to one of our auctions, you will need to have an address, phone number and driver’s license number handy. Once you are registered, you will receive a bid number. Once the auction starts, the bidders sit or stand in view of the auctioneer as items are brought up one by one to be sold.
Placing bids on items – The auctioneer will briefly describe the item that’s about to to be sold and starts the bidding at a price he or she thinks is a reasonable opening bid. If nobody there are no takers on the item, then the auctioneer will often try a lower opening bid.
Here is an example of this:
Up for bid is this antique crock. Who will give me $50 for the crock? Do I hear $50? No? Who will give me $25 dollars for the crock?… Ten dollars?… Who will give me $5.00 for the crock?
At this point multiple people might be thinking that this is a really good deal and more than 1 person raises their bid card. The auctioneer will choose one of them and then say: “I have $5 over here. Do I hear ten?” Each auctioneer will usually have preset bidding increments (each next bid jumps up $2.50 or $5, etc.), and not all auctioneers have the same ones. The bidding picks up and continues to go higher and higher.
At this point the auctioneer starts speaking at a rapid-fire pace, this is a tradition known as the “Auction Chant”: “Forty, now fifty, now fifty, now fifty, do I hear fifty?” Translated he is saying “I have a bid of $40.00. Does anyone want to offer $50?”. He will repeat this a couple of times. Another hand goes up across the room. The auctioneer doesn’t always see the hand go up straight away, but one of the assistants, known as a “ringer”, might spot it and shouts “YES!”, pointing toward the bidder. This will draw the auctioneer’s attention to the new bidder. As bidders reach their max bid, they drop out until there is only one bidder left.
If nobody else bids, then the auctioneer will close the bidding and announce that bidder as the winner. Then the next item will be auctioned. The above process happens in less than 2 minutes and the process is repeated until everything is sold.
When bidding, there are a couple of important things to keep in mind:
1) The auctioneer’s call is final. That means if you were not paying attention and try to place your bid after the auctioneer says “SOLD”, or in rare cases where the auctioneer & ringers don’t catch your bid – Sorry, you are out of luck! This situation can easily be avoided by making sure to pay close attention when your item comes up and holding your bidder card up clearly so the auctioneer can see it. You can make a loud noise if you don’t think the auctioneer has your bid to make sure that you get noticed.
2) If you win the bid, you become the legal owner of the item and ownership transfers to you immediately. An invoice is generated and you will need to pay for any items you’ve won before leaving for the night. If items are handed to you,then you are responsible for keeping an eye on your item to ensure it doesn’t get damaged and no one else walks away with it. If it’s a small to medium sized item, it’s a good idea to collect it and bring it back to your seat. Larger items are usually moved to the loading area or left in place on the auction floor. All items are sold as is and you can not change your mind about buying the item once the auctioneer says “Sold”.
“Lots”, “Your Choice” and “Times the Money”- There are a couple of variations on the standard bidding procedure outlined above that you need to be aware of. Occasionally items will come up where you are bidding on a “lot” of items. A “Lot” simply means “more than one”. One term you’ll see often in auction listings is “tray lots” or “box lots.” To help keep things more organized, small items from the same seller are often grouped together on plastic trays or in boxes. One example is a tray carrying 9 necklaces, all coming from the same seller, is considered a “lot”. This is so the auction company can keep track of the seller’s items so he or she can be properly paid for their items.
Before the auctioneer starts the bidding for a “lot”, he or she will decide on how the lot is going to be sold and explain what exactly your bid will get you. It’s important to listen carefully at this point!
Your bid might buy you the entire lot, in which case the auctioneer might say something like, “You’re buying all 9 necklaces for one money” or “On the pair of vases, let’s start the bidding at $10”. In this case, the amount you bid is the total amount you pay for all 9 of those necklaces (or for both of those vases).
Another way lots can be sold is on a “choice” basis. Let’s use the necklace example again. The auctioneer starts with “Now bidding on your choice of the necklaces…” Bidding continues as normal. Let’s say you win the bid at $10. This means that you have bid $10 on one necklace on the tray. A helper will bring the tray lot up to you and you decide that you want 2 of the necklaces. The helper shouts to the auctioneer “Bidder number 17 takes 2!”. When you leave you’ll pay $20 ($10 each) for the 2 necklaces. Now there are 7 necklaces left on the tray. Other bidders can decide if they want any for $10 otherwise they go up for bid again. You can even bid again if you want. Since you took the best necklaces already, the remaining ones might sell at a lower price. There might be one more round of “your choice” followed by selling all of the remaining necklaces for “one money”.
Sometimes when a lot is sold, the auctioneer will specify that all of the items in the lot will be sold for your bid amount multiplied by the number of items in the lot. Using the necklaces example again, the auctioneer might say “On the necklaces, 9 times the money”. Let’s say you win the bid at $10. You are now the proud owner of 9 necklaces for a total of $90. This is commonly done with items such as dining room chairs, where you are bidding on one item but your bid gets multiplied by the number of items.
The Buyer’s Premium – Many auction companies will charge the buyer a 10-20% “buyer’s premium” to purchase at the auction. This charge is pretty historic and allows the company to offer a reasonable commission rate to the seller. This premium also helps to ensure good quality merchandise for offer to the buyer.
Since many auction companies operate on a shoestring budget, often times the costs of credit card transactions are passed along to the buyer as well. So the buyer’s premium may be (for an example), 13.5% for credit/debit card purchases, and 10% for cash or check payments. On-line auctions with Internet bidding often charge a higher buyer’s premium as well, as there are many more costs that are involved. On-line auctions will often include a per item fee (usually around $1 per item) for each item that you win on-line. The bottom line is to always pay by cash or check when possible to pay the minimum buyer’s premium available. At the auction, when bidding, keep in mind the additional cost of the buyer’s premium, as well as sales tax.
I hope that this has helped you understand how auctions work a little better so that you will be better prepared for your next auction!