An “Auction Reserve” is the minimum bid an Auctioneer must receive before selling an item, and is typically used to protect a consignor from having their merchandise sell too cheaply. Auction Reserves are typically found at higher-level auctions with higher-priced items. Reserves are rarely used in mid-level or lower-level auctions. So why aren’t Reserves used in all auctions. They make sense, right? The answer is fairly simple.
What’s the #1 reason people attend auctions? If you answered “To Get a Bargain” you would be correct. However, if an Auctioneer gives “You” a Reserve, they would have to give all consignors a Reserve. And once the word gets out that most auction items have a Reserve, few people will attend that auction.
However, once bidders know that an auction is “Absolute Without Reserve”, they begin to smell blood and, like sharks, flock to such auctions in search of bargains. And once the potential bidders are in attendance, let the bidding begin. When sold in a competitive bidding situation, better items will often sell for premium prices.
WHAT’S IT WORTH? You should be aware that many Auctioneers who accept “Reserves” also have “Buy-Back Fees” to cover their expenses on unsold items. Often the Buy-Back Fee is 10%. So, if you request a $1,000 Reserve from an Auction House, and your item fails to reach the Reserve Price, you may owe the Auctioneer $100 (10% of the $1,000 Reserve) just to get your item back. So before cosigning items to any Auctioneer be sure to ask about the Reserve Policy and Buy-Back Fees.
Mike Ivankovich is an Auctioneer, Appraiser, Home Downsizing Expert, and host of the “What’s It Worth? Ask Mike the Appraiser” Radio Show that airs live in the Philadelphia PA area on Friday mornings from 9:30-10:30 AM EST on WBCB 1490 AM and on the Internet at: www.WBCB1490.com. You can also visit his Radio Show Web Site: www.AskMikeTheAppraiser.com Further details can also be found at: www.michaelivankovichappraisals.com