Let me begin again by saying that I believe television shows about the auction business are generally good.
The added exposure for the auction method of marketing is beneficial to all of those involved in the auction business.
I don’t doubt shows about the auction business will drive more clients and customers to utilize auction marketing.
However, particularly curious statements were made during a recent episode of the History Channel’s Real Deal filmed at Don Presley Auctions in Orange, California.
The premise of the show appears to involve an owner bringing in an item for a dealer to look over and offer that owner a certain purchase price. Then, the owner and dealer negotiate until either the owner sells to the dealer or submits the item to auction.
On this particular show, an Elgin Bicycle, slot machine, 18K (?) Spider Man Figure and historic tooth were all items subject to a negotiated sale or auction. Only the historic tooth was sold prior to auction.
However, the point of this story is that the show continually characterizes the auction as inherently high risk. In fact, all the following words and/or phrases were used during the show to describe the auction:
Huge risk
Unknown
Very big risk
Tangled web
Less certain
Gamble
Risky
Crapped out
It makes me wonder if the producers of the show sat around saying, “How many ways can we describe the auction as high risk? Let’s use as many different words as we can …”
And, are they right? Are auctions high risk? We beg to differ.
First, the show portrays the pre-auction negotiation and the auction itself as mutually exclusive? The dealer’s high offer is $1,000 prior to the auction, but it sells at auction to another person for $700? Why wasn’t the dealer at the auction, and why didn’t the dealer bid $800?
If this “Real Deal” auction was indeed real, the dealer would be a bidder, and the items would probably always sell for just as much or more than the pre-auction negotiated price.
Too, this is a classic example of having all one’s eggs in one basket. Auctions are often many more eggs, and many more baskets — where the seller might receive bids less than their expectations on some items, and in excess of their expectations on other items … which results in a blending of results.
Nevertheless we believe auctions are not high risk at all. We wrote about the topic of “Does anything sell at auction for less than market value?” Our conclusion was generally that at a well publicized public auction nothing sells for less than market value.
Further, what are the relative costs of either selling to a dealer versus at auction? If the auction costs the seller, say 20%, does the dealer pre-auction offer cost the seller the same? What does it cost to find just the right dealer to meaningfully offer prior to auction?
If John has a World’s Fair mechanical bank he wishes to sell, can he find an auctioneer to sell it for him? Sure; auctioneers are not hard to find. But, if he wants to find that one dealer that collects World’s Fair mechanical banks of this type, how does John find him or her? And, what does that search cost?
It may well be that if John can sell it for $700 at auction — with a 20% commission — netting him $560, that this might be better than selling it to a dealer for $1,000 if it costs him in his time and effort and otherwise, anything over 44% to find that particular dealer.
And, how does John know that he has found “that dealer?” Maybe he finds a dealer, who gives him $1,000 for this World’s Fair mechanical bank, where the bank is actually worth much more at auction? It would appear there is just as much risk selling prior to auction as selling at auction.
While I always enjoy listening to Bryan Knox bid call (see him in action in a previous story here: http://mikebrandlyauctioneer.wordpress.com/2010/03/02/why-arent-auctioneers-saying-sold/, I think the scenario here of the auction being high risk is unfounded.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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