Online Estate Auctions: Primer For Sellers And Buyers
Simple Guide For Sellers Needing To Chart A New Course And Buyers New To Auctions!
There are many reasons why the conventional estate sale model is losing prominence and turning to online estate auctions.
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One obvious reason is a decline in economic activity.
In light of that, estate liquidators are scrambling to keep their businesses relevant and solvent.
Online auctions are the quickest and most efficient method for estate liquidation, and for estate sale businesses to keep serving the market.
In an online auction, items are presented on the block, the auctioneer call bids, and customers bid to acquire the object at the lowest bid.
Whether you’re thinking about converting your estate sale business to an online auction, or looking to buy, online estate auctions may be just the thing for you.
Since their first appearance, Internet auctions have become one of the hottest phenomena of the web.
They offer buyers a “virtual estate sale market” with an endless range of merchandise from around the world.
And, they give sellers a “storefront” from which to market everything from sports memorabilia to computer systems to millions of international buyers.
Whether you’re a seller or a buyer, there’s a smart way to “do” online estate auctions.
Here’s how to make sure you get the most from your online estate auction action.
What Is An Online Estate Auction
Online estate auctions are basically bazaars.
In most cases, sellers offer one item at a time, but sometimes sellers offer multiple lots of an estate’s personal property.
The auction web sites often refer to auctions of multiple items as “Dutch” or “English auctions.
At some sites, the seller may be required to sell all items at the price of the lowest successful bid.
At other sites, the seller is entitled to the prices bid by each of the highest bidders.
Occasionally, online estate auction sellers set a “reserve price,” which is the lowest price they will accept for an item.
Some sites disclose the reserve price during the auction.
The bidding for each auction closes at a scheduled time, when the highest bidder “wins.”
In the case of sales of multiple lots, the participants with the highest bids at the close of the auction are obligated to buy the items.
If no one bids at or above the reserve price, the auction closes without a “winner.”
At the close of a successful auction, the buyer and seller communicate, usually by email, to arrange for payment and delivery of the goods.
Types of Auctions
Online estate auctions can be business-to-person or person-to-person.
Operators of business-to-person auction sites have physical control of the merchandise being offered and accept payment for the goods.
In person-to-person auctions, individual sellers or small businesses offer their items for auction directly to consumers.
Generally, the seller, not the site, has physical possession of the merchandise.
After the auction closes, the seller is responsible for dealing directly with the highest bidder to arrange for payment and delivery.
Buyers may have several payment options, including credit card, debit card, personal check, cashier’s check, money order, cash on delivery and escrow services.
However, all sellers do not accept all forms of payment.
Credit cards offer buyers the most consumer protections, including the right to seek a credit from the credit card issuer if the product is not delivered or if the product received isn’t the product ordered.
Typically, sellers using business-to-person auction sites accept payment by credit card.
But, many sellers in person-to-person auctions don’t.
Usually, they require payment by cashier’s check or money order before they send the item to the winning bidder.
Some sellers agree to use an escrow service.
For a fee, generally 5 percent of the cost of the item, paid by the buyer, an escrow service accepts payment from the buyer via check, money order or credit card.
The service releases the money to the seller only after the buyer receives and approves the merchandise.
This helps protect buyers from ending up empty-handed after paying their money.
The flip side?
Using an escrow service can delay the deal.
As with any business transaction, investigate the escrow service’s reputation before signing on to the service.
Occasionally, sellers agree to send items COD, with the buyer paying when the item is received.
According to the Federal Trade Commission, online estate auction fraud has become a significant problem.
Most consumer complaints center on sellers who:
- Don’t deliver the advertised goods;
- Deliver something far less valuable than they advertised;
- Don’t deliver in a timely way; or
- Fail to disclose all the relevant information about the product or terms of the sale.
Quick Tips For Buyers
- Identify the seller and check the seller’s feedback rating.
- Do your homework. Be sure you understand what you’re bidding on, its relative value and all terms and conditions of the sale, including the seller’s return policies and who pays for shipping.
- Establish your top price and stick to it.
- Evaluate your payment options. If possible, use a credit card. It offers the most protection if there’s a problem. Consider using an escrow service if the seller doesn’t accept credit cards.
Know The Seller
- Find out whom you’re dealing with. Verify the seller’s identity before you place your bid, and be wary of sellers who you can’t identify. Some sellers may use a forged email header, which makes follow-up contact close to impossible.
- Get a telephone number for the seller and use it to confirm that you have some way other than email to contact the seller
- Check to see how the seller has treated other buyers. Some auction site post feedback ratings of sellers based on comments by other buyers. This may give you some idea of how you’ll be treated, but beware of “shill” testimonials.
- Before you bid , find out what form of payment the seller will accept. If the seller accepts only cashier’s checks or money orders, decide whether you are willing to take the risk of sending your payment before you receive the product.
- Find out who pays for shipping and delivery. Generally, sellers specify the cost of shipping the item and give buyers the option of express delivery for an additional fee. If you’re uncertain about shipping costs, check with the seller before you bid.
- Check on the seller’s return policy. Can you return the item for a full refund if you’re not satisfied with it? If you return it, are you required to pay shipping costs or a restocking fee?
- If you have any questions about the item, email or phone the seller. Don’t place your bid until your questions have been answered.
- Know The Product
- When considering whether to place a bid, know exactly what you’re buying. Read the seller’s description of the item, or service, and if a photograph is posted, take time to look at it closely.
- Try to determine the relative value of an item before you bid. There’s no guarantee that something is a good deal just because it’s on the Internet auction block. “Brick-and-mortar” stores and online price-trading sites may be good reality checks on price. If you find a bargain at an auction site, remember the adage about deals that seem too good to be true. They usually are.
- Read the fine print. Look for words like “refurbished,” “close-out,” “discontinued,” or “off-brand,” especially when shipping for computer gear or electronic equipment.
- Consider whether the item comes with a warranty, and where you’ll get follow-up service if you need it. Many sellers don’t have the expertise or facilities to provide services for the goods they sell. If that’s the case with your seller, be sure you’re willing to forfeit that protection before placing a bid.
How Do Internet Auctions Work
- Check how the auction works. Don’t assume that the rules used by one Internet auction site apply to another. Some sites offer step-by-step tutorials that take potential buyers through the bidding process. Taking a few minutes to go through the tutorial might save you frustration or disappointment later.
- Find out what protections the auction site offers buyers. Some sites provide free insurance or guarantees for items that are undelivered, inauthentic or just not what the seller claimed.
- Bidding Tips
- If you decide to enter the bidding, proceed with caution. Establish your top price and stick to it.
- Don’t bid on an item you don’t intend to buy. Remember that if you’re the highest bidder, you are obligated to follow through with the transaction. Auction companies often bar “non-paying bidders”—those who back out of a deal—from future bidding.
- When bidding, take steps to protect your privacy. Don’t give out personal identifying information like your Social Security number, driver’s license number or bank account number. No seller should need it.
- Save all your transaction information. Print or make note of the seller’s identification, the item description and the time, date and price you bid on the item. Print and save a copy of every email you send or receive from the auction company or the seller.
In an online auction, items are presented on the block, the auctioneer call bids, and customers bid to acquire the object at the lowest bid.
But, if the item is a rare object of art, antique, etc. bids will escalate until the sale price becomes immaterial.
In this case, professional auctioneers with years of experience conduct manifold auctions in-house, online and on the phone.
Why Use Starting Bids
It’s not uncommon to confuse the terms “starting bid”, “minimum bid” and “reserve price.”
Usually the consigner (estate sale customer) is expressing “minimum bid,” meaning that he/she doesn’t want the item to sell for less than the amount stated.
For instance, consignment items almost always have minimum bids; so you cannot sell the consigned item for less than the minimum bid provided by the consigner.
In other words to make this as simple as possible, starting bid,” also called “opening bid” is the amount suggested by the auctioneer to open the bidding.
If no bidders are interested in bidding at that amount, the auctioneer will drop the opening bid until a bid is received.
Minimum bid, also called “reserve price” is the price an item can be sold.
If the final bid does not reach the minimum bid, the item remains unsold.
To summarize, the starting bid can be less than the minimum bid, but the item cannot be sold until it reaches the minimum bid.
Auctioning Consignment And Priceless Items
Another probable reason why estate sales are turning to online estate auctions is: it can be hard to put a price tag on merchandise in a competitive market, especially if the item is priceless.
For consignment items, bidding should start at 10% above the estimated appraisal of the item for the participant.
If the item estimated appraisal is $1,000, then bidding should start at $1,100.
Items that are priceless might include a collection of art created by a family member, or something sentimental that just can’t be priced.
A good pricing strategy is to start the bid low to allow bidders emotional connection to the item determine the value and drive up the price.
Auctioning personal property is one of the earliest selling methods.
In fact, Goodwill is famous for using silent actions to sell antiques, collectibles and priceless items.
It is a simple process of having your bid added to a list or submitting a written bid among a group of bidders.
In either case, the highest bid wins the merchandise.
Those methods were simple, uncomplicated and without a starting bid.
Today, Goodwill successfully uses online gallery auctions with reserve price to sell priceless, antique and collectible items.
For their donated items, the starting bid is usually 30% of the fair market value of the item.
For example, if a donated item’s fair market value is $100, it is usual to start bids at $30.
Why Online Estate Auctions Work
Online auctions work because auctions are the quickest and most efficient method to sell personal property.
They create a sense of urgency to buy one-of-a-kind items and eliminate “set” pricing.
Sellers still have complete control over when the estate auction will b held; where it will be held; how much property will be auctioned; what the terms and conditions are, etc.
Online estate auctions are fair to all parties and meets all state and local tax requirements.
If you have ever attended a “live” or online auction, you know it can create a lot of excitement, and sense of urgency that no estate sale can match.
More importantly, an online auction can make the cash register sing the loudest because they have a vast email marketing list of hungry buyers.
At public, private or online auction, personal property is sold in view of all attendees; so there is 100% openness.
Estate sellers and clients are encouraged to attend to see the excitement and how the inventory is converted to cash!
What could be more fun than witnessing the success of your online estate auction?
How To Choose An Auction Company
Auctions are licensed by the state and operated by industry standards.
Since your partnership is goal oriented, it is crucial that the auction company be a member of the state and national auctioneers’ association, before you even consider doing business with them or giving them credit on your website.
These credentials provide necessary checks and balances of their strict code of ethics.
The Universal Commercial Code (UCC) specifically outlines important regulations that professional auction company’s must follow.
Moreover, auctioneers are highly experienced with a treasure of appraisal and sales data under their belts.
Why Online Estate Auctions Deliver
Online estate auctions deliver because they provide fair market value.
In other words, prices are continuously driven up through competitive bidding.
Thus, a buyer is willing to pay whatever the market will bear.
The auctioneer drives the price and the crowd drives the momentum, which results in fair market value.
Before you decide to close your estate sale business due to lack of sales, consult a local auctioneer.
They can reveal how an estate sale and auction can come together as an online estate auction with century’s old methods of marketing and sales to breathe new life into your business and be a win-win for all parties.
By Tonza Borden, Former Estate Liquidator and Certified Appraiser of Antiques And Collectibles