A few weeks ago, I awoke to a sound in the master bathroom.
Drip … drip … drip … drip … drip … drip …
I got up and fumbled my way to the bathroom and turned the faucet handle a bit tighter, and the drip stopped.
My plan for the next day was to call someone about fixing this “drip” so that I could sleep soundly.
We all want to sleep soundly, right?
What about in the auction business? As an auctioneer, enough quality sleep is paramount for good health. And auctioneers are rightly worried about the financial health of their clients as well.
I see some auctions where after the auction is presumably over, there is a notice that “passed lots” are now available, and at lower prices. I suppose, for example, a decorative lamp previously with a minimum starting bid of $1,500 is now available for $900 — that type of thing.
Sometimes the decorative lamp in our example is available at a fixed price following the auction, or put up for auction again at this new lower price. In either case, if our decorative lamp doesn’t demand this $900 minimum, it is offered at a new lower price, or returned to the consignor.
I’m not sure I understand the merits of this so-called auction marketing method.
Let’s say the lamp is worth $1,500 or more. Why wouldn’t it demand this $1,500 or more price at auction the first time without any minimum bid at all? Further, if the consignor is willing to accept any bid at or in excess of $900 then why is the minimum bid $1,500 in the first place?
I doubt there is any auctioneer on earth who isn’t familiar with the axiom, “It’s only worth what someone is willing to pay for it.”
This phenomenon is amplified when there are 10’s or even 100’s of “passed lots.” For example, what if this is the notice following a 300 lot auction?Our passed lots from our auction this past Saturday. New lower prices! Stop in to buy any of these passed lots:
3, 4, 5, 7, 8, 9, 11, 12, 13, 17, 18, 19, 20, 21, 22, 23, 24, 29, 30, 31, 32, 32, 34, 35, 40, 41, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 63, 64, 68, 69, 70, 71, 73, 74, 75, 76, 77, 78, 81, 82, 83, 84, 85, 86, 91, 92, 104, 105, 106, 107, 108, 109, 111, 113, 117, 118, 119, 120, 121, 124, 125, 127, 128, 129, 130, 132, 133, 135, 136, 139, 140, 141, 142, 143, 144, 145, 146, 148, 149, 153, 154, 155, 156, 157, 158, 159, 161, 164, 165, 167, 169, 170, 171, 173, 175, 176, 177, 178, 179, 183, 184, 190, 191, 192, 193, 194, 195, 196, 198, 201, 202, 203, 204, 205, 207, 208, 209, 212, 213, 215, 217, 218, 219, 220, 222, 223, 224, 225, 226, 228, 233, 234, 235, 236, 237, 238, 239, 243, 244, 245, 246, 248, 251, 253, 254, 255, 256, 257, 267, 268, 269, 271, 272, 273, 278, 282, 283, 284, 291, 292, 293, 294, 296, 299.
This would indicate that 177 of 300 (59%) lots didn’t sell. In other words, 59% of the lots were overpriced. So then the process is … as I hear my faucet … drip … drip … drip.
Is this the best way to market property at auction? I don’t think so.
First, doesn’t an auction like this teach the bidders to not bid and wait until prices are lower? An auction that trains bidders to wait is counterproductive at best.
This method is really no different than the “traditional” real estate market in the United States: list the property too high, and then keep lowering the price until someone makes an offer. The counter in the United States is the auction method of marketing, which means starting low and enticing bidders to participate and then working “uphill” to the final selling price.
In our example here, how many of the 59% of originally unsold items remain unsold? So the seller just gets their property back? All that time, labor and anticipation, and nothing to show for it?
The strategy I (and most auctioneers I suppose) would recommend would be to take these 300 items and sell them without reserve (absolute) and likely attract a much larger number of bidders, and materially higher prices. Plus, everything would sell — no passed lots at all.
And for that guy with that he-thinks-it’s-a-$1,500 lamp? This new plan would have him either sell it without the reserve, or just keep it. In other words, “If you aren’t willing to let the market decide what your lamp is worth, hang on to it.”
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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