Auctioneers tell me bidders won’t bid past published reserves. Auctioneers tell me bidders won’t bid past pre-auction estimates. In other words, publishing reserves and/or estimates injures sellers? This is all absolute nonsense.
We previously wrote about published reserves and noted bidders routinely bid past these amounts when they sense a higher value: https://mikebrandlyauctioneer.wordpress.com/2020/11/20/bidders-wont-bid-past-disclosed-reserve/.
These misguided theories seem to stem from auctioneers thinking all bidders are not “well informed” when actually bidders are generally very well educated about their particular interests — in fact — maybe more so than auctioneers.
There is this technology widely known as “The Internet” where values can be researched, compared, contrasted, investigated, and verified … so if you have, for example, a motorcycle worth $20,000 with a pre-auction estimate of $2,000 – $5,000, bids will likely reach about $20,000.
Actually, we wonder if [generally] pre-auction estimates are even necessary anymore. For the most part, if we correctly conclude bidders know values, why give them a valuation? If selling without reserve (absolute) it seems completely unnecessary.
On the other hand, with a minimum bid, a pre-auction estimate (appraisal) is probably the easiest way to project the “prospect of a deal” which is essential for any auction to work well for the seller. And of course, bidders often bid more (or less) than this estimate …
These “minimum bid-related estimates” are properly used to solely induce bidders to pay attention, and then after that bids are largely independent of such values. Again, bidders bid past these published reserves and estimates all the time.
For instance, it makes sense to denote the approximate value when stating a minimum bid. Let’s say the minimum bid is $350,000. An advertisement that says “Minimum bid $350,000” can be vastly improved by saying “Appraisal $600,000, minimum bid $350,000.”
For those auctioneers who still don’t believe it, this above property sold for $725,000. That’s $125,000 over the published appraisal and $375,000 over the minimum bid. Why did it? There was the “prospect of a deal” and bidders responded accordingly.
Finally, is your auction working? Good. Is your auction not working? Here’s why: https://mikebrandlyauctioneer.wordpress.com/2018/03/12/what-drives-bidders-to-an-auction/.
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, Brandly Real Estate & Auction, and formerly at 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 has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.
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