Hidden reserves disguised as phantom bidding
 

As I prepare for the Hunt auction this weekend, I had a long talk with someone on their staff today since I want to participate in the internet and phone auction.

I learned today, that if I am a phone bidder, and I am bidding on an item with a hidden reserve, the auction house will "bid against me" until the reserve is met.

I now must wonder, that in past years, as I won and lost various auction items at Hunt, if I truly was in a bidding battle with other collectors, or if I wound up in a bidding frenzy against an imaginary foe.

I am a disiplined bidder and will usually not go over a predetermined amount, however, I now feel like I have to be more careful than ever when bidding.

Why can't Hunt just come out and tell the hidden reserve price, or start the auction at this amount?

Is this only true if you are a phone bidder? I bid on Hunt all of the time but only through the Internet.

I am not sure.

At least on the internet, you could have time to plan and think about your next bid or move. On the telephone, you are blind to what is really going on and you need to make split second decisions.

I was at the Hunt Superbowl auction and I was able to bid and see if I was competing against others in the audience, or David Hunt who may have been bidding for an absentee bidder, or phone bidders. Now I guess not only was David bidding for absentee bidders, he was also bidding against the reserve.

I have known David since he started the sports business from his fathers furniture one and have to say he has always been upfront with everything.

In auctions where more than one person has left a bid he take it to the highest bid between the two before it goes to the phone and live.

If the co-signer has left a reserve David will bid to the reserve and no more.

There are cases where both of the above take place

According to the website the reserve is the "minimum bid" on their monthly internet/phone auctions.

#3. Each lot has a minimum bid, which must be placed in order for the item to sell. Our minimum bids are the actual reserve prices and if met the item(s) will sell; there are no other “hidden” reserves or minimum bids. All bids must be at least 10% above the current high bid showing. You may enter any bid amount you wish (rounded to the nearest dollar) as long it is at least 10% above the current high bid. See “ceiling bids” under #4 below for more details.

On the other hand, the rules for their "live" auctions are a bit different.

All lots will be listed with starting bids, which do not necessarily reflect
published estimates or reserve amounts. Proxy bids placed via phone, fax,
email, or mail (see #2 above) will be entered into the online pre-bidding
system along with any applicable reserve amounts so that online bidders
will be able to see the current high bid at any given time.

Also found this nugget regarding the live bidding format. Now, my wonderlic score is not the best, but I believe it basically says that Hunt can raise or reject your bid if they are having a bad day.... :eek:

The auctioneer reserves the right to reject any bid or raise which, in
the auctioneer’s opinion, is not commensurate with the value of the
lot being offered or which may have a detrimental effect on the lot in
question or the auction as a whole. Reserve bids may be executed on
catalogued lots on behalf of the seller and shall be executed confidentially
in a manner similar to the execution of absentee bids.

Lovely Day...

Yeah I don't like anything about hidden reserves. Yes at least they up front about it but still...
Hidden reserves encourage more bidder participation which the auction house(s) love because it encourages bidding wars even if it is against a pre-determined amount set in by a mystery person. For some people their egos get the best of them and they end up bidding it up just "a little" higher.

The part where Hunt allows themselves to reject any and all bids as they deem necessary is quite scary. :eek:

Isn't one of the primary draws of the auction format the chance that you may get a bargain?

It seems as if Hunts has eliminated that possibility. Now it seems as if the hammer must be catalog price... or more.

:rolleyes:

I think you guys need to remember there is a difference between internet bidding and "live" bidding. Hunt has monthly internet-only auctions that are in pretty much the same format as other internet auction companies where there is an ending time which is extended on lots that continue to get bids, etc. In the internet-only auctions, the reserve is the starting price.

The situation Michael is talking about is one of Hunt's LIVE auctions which they hold periodically throughout the year (but not monthly) in which he is on the phone bidding in real time in an auction that is ongoing with one item being presented for bidding at a time. You can submit bids via internet for these live auctions ahead of time (pre-auction bids), but to my knowledge, you cannot bid online in real time as the auction is going on.

Generally speaking, auction houses do NOT like reserves, hidden or otherwise, as it means there is a chance the item will not meet the reserve when it goes to auction (which means they don't make ANY money on it). If a consignor asks for a reserve on their item, they will almost always try to give them a lower reserve amount to ensure that the item actually sells. In some cases, typically for high-profile, big ticket items, they will agree to a higher reserve knowing that, even if that particular item does not reach the reserve, they can use it in marketing and draw in more bidders, whereas if they did not give the consignor the high reserve, they simply wouldn't consign the item. Even so, it can be quite a struggle for a consignor to get the high reserve that they want.

I have not been to any of Hunt's live auctions, though I do bid in their internet-only auctions frequently. From what I'm understanding the "hidden reserve" situation to be with the Live auctions though, it seems to be a matter of preference. The bar is still set at a certain dollar amount whether you know ahead of time what that amount is or not. One way or the other, if the bids don't reach that reserve amount, nobody is taking the item home with them. It may be that Hunt could be a little more up-front with the procedure, but as long as the auction house bidder drops out when the price reaches the reserve amount, does it really matter if you had to bid against a "phantom bidder" to get to that amount vs. knowing what the reserve was ahead of time and starting your bidding at that level? As long as you don't bid more than you're comfortable spending, you still either win the item or, if your comfort level is below the reserve, you don't. This isn't the same situation as some auction houses having a "house account" that actively bids in their auctions simply to drive the price up.

As for the bit about the auctioneer having the right to reject bids, my understanding is that also applies to the live auction situation and means that if an item isn't getting any bids, you can't shout out "One Dollar" and take it home with you, or every time someone bids you can't just repeat their bid plus one dollar. It means that just because you're in the audience, if your bidding is disruptive to the general process, they don't HAVE to accept your bids. They probably haven't had to enforce the rule very often, if ever, but it's there just in case.

Lance Fittro

If you search the Archives on the main forum I believe this subject has been discussed at length in several previous threads over the years.

Someone mentioned Dave being a "good guy". I don't want anyone to think I was implying that he wasn't. I have always liked Dave and his staff and have won some great items over the years.

Their rule #3 says there are no other “hidden” reserves. What the heck does that mean? My whole point was that there is a hidden reserve. Boy am I glad they don't have multiple "hidden" reserves as one is too many.

During my conversation with Hunt today, I was also told that if something does not hit the reserve, it will show on the web site as DNS (did not sell) and we can call them and try to negotiate a transaction.

Not sure how I feel about that.

Everybody goes into an auction with larceny in their heart.

As somebody that deals with consignors everyday, I can tell you that collectors tend to hate reserves, unless it is their item being sold, then they are all for them.

Scott

Scott - please don't equate with practice with the concept of a reserve. I think most everyone (including bidders) understand the point of a reserve and don't have an issue with it. Hiding the reserve and then making you think you are bidding against another live person is a completely different animal.

+1
Agreed

Agreed

I was responding more to the comment about bidding in auctions in hopes of getting a bargain.

My comment was not even a negative comment, I was just stating that bidders want an item cheap and sellers want the most that they can get. There is no perfect auction process that guarantees both people are happy.

Higher minimum bids decrease the bidding and usually the price realized. Lower minimum bids foster competitive bidding, which usually brings higher prices in the long run. It is hard to make consignors understand that though because they get scared. Each auctioneer has to make a business decision on how they want to handle that.

The best solution for a bidder is to have some bidding discipline. Set your price and don't go any higher. If you don't hit the reserve, then you were not going to win the item anyway.

Scott

FWIW, this is also true of Hunt major auctions when you bid through the internet and live auctions. I personally found this out during the 2010 All Star Hunt's auction when I bid on one of the lots from the Dick Emberg collection. :rolleyes:

Michael,
I did this in the 2010 Hunt's live All Star auction. I ended up winning the lot for the reserve price, which I thought was still reasonable. I managed to pick up a great lot at a pretty great price.........

I guess I'm just old school. The auction price is set by the bidders.


http://www.amazon.com/b?%5Fencoding=...&creative=9325

I think it does matter if the auction house is the phantom bidder. It creates the appearance of at least one other **real** bidder willing to pay a certain price (that is, demand) when it does not really exist. Some might call this market manipulation.

If I am not mistaken, other auction houses such as Heritage do this as well (house bidding.)

Hunt Hidden reserves
 

This may be why I noticed some items in the recent Hunt Robin Roberts auction did not sell even though the bids that you could see online up to the day before the auction ended were not sold even though there were bids that seemed to me to be close to value.

I also wonder if Hunts has their own items in their auctions? I noticed a few items in the Roberts auction that had been in a recently completed Huggins and Scott auction. After buying and paying the juice to H&S, then relisting in Hunts a month later would seem to be a stretch for a collector to sell on Hunts with them taking out 15% or so consignment fee.

A few of the items I referenced from the H&S auction ended up not selling in the Hunt auction even though they had, as I said significant bids. Some did sell.

I guess they did not meet the secret reserve. Looking in the completed auction section on Hunts site there were quite a few DNS (Did not sell) listed, so I guess there were quite a few hidden reserves.

Question
 

What about the scenario whereby the bidding never reaches the hidden reserve, but the buyer would have been happy to pay that amount had he known what it was, and obviously the seller would have been happy with the reserve price, but the item doesn't get there and doesn't sell? So now nobody's happy because of the hidden reserve strategy. I wonder how often that happens?

I guess at the end of the day it's really like a fixed price sale on the lots with reserves. They decide to hold an auction to see if anyone is willing to pay "more" than the sale price. I just bid assuming all lots have a reserve and the house/consignor may have a different opinion than I do what the real value of the item is. Sometimes I win, not really the right way to express it, maybe it would be better to say, sometimes we agree on the value, sometimes not.

My guess, quite often. And,.........if the reserves were disclosed then the bidder could at least pick up the phone and say, "He, I'll pay the reserve now that the curtain has been pulled back and I know what it is."

That should only happen if you're not bidding as much as you are willing to pay. That's one thing that I've never understood is buyers who are willing to pay more if they know absolutely where the bar is set, but if not, will lowball bids until they lose the item. Maybe it's born of distrust of the auction houses and shill bidding driving up the price, but I run into this even when selling on eBay. I don't know how many times I've had a buyer come to me with some sob story about a photo or something belonging to their great-uncle and they really wanted it but were outbid and can I contact the buyer and see if they would sell it to them. And then I go back and look at the bid history and they only bid like $10 for it. Seems like an important piece of your family history should be worth more of an effort than that, shouldn't it?

Maybe I'm oversimplifying things, but it seems to me that if you bid less than you would be willing to pay and lose the item because you were either outbid or didn't reach the reserve, hidden or otherwise, then you don't have anyone to blame but yourself. If you bid as high as you are willing to go and still don't reach the bar, that's one thing, but if you're lowballing yourself, you must not want it as bad as you thought.

Maybe I'm oversimplifying things, but it seems to me that if you bid less than you would be willing to pay and lose the item because you were either outbid or didn't reach the reserve, hidden or otherwise, then you don't have anyone to blame but yourself. If you bid as high as you are willing to go and still don't reach the bar, that's one thing, but if you're lowballing yourself, you must not want it as bad as you thought.[/QUOTE]

That sounds good in theory, but then why do so many people stay up all night to fight it out for the final bid? There's some psychology there that I've never understood, other than distrust of the ceiling bid process, but it's widespread nonetheless. If I didn't trust an auction house, I'm not bidding in their auction, otherwise I'm always happy to plug in my maximum and let it ride. Same is true of sniping on eBay. Of course, it's discouraging to be the underbidder, but you have to draw the line somewhere and let the chips fall where they may.