How do auction reserves work?
 

I see that some auction houses allow reserves now, but I am not familiar with how they work. Here is a rule from the current Goldin auction. Is this typical? How does a bidder know if they are bidding against a “real” bidder and not the auction house bidding on behalf of the consignor?

“GA may place bids below the reserve on behalf of the Seller, either consecutively or in response to other bids.”

The answer, unfortunately, is that every auction house is different. Some, like Golden apparently, have active reserves. They bid against bidders until the lot reaches the reserve, at which point they stop bidding. If I am correct that means that the high bidder on any lot that has not reached the reserve is the auction house.
Some, like REA, have passive reserves. They do not bid at all; they just indicate that either the lot has or has not reached it’s reserve. If it reaches or exceeds the reserve it will sell. If it doesn’t it will not. The problem with REA’s reserve system is that they do not openly disclose the reserves on their site. HOWEVER, if a bidder calls REA will disclose the reserve.
Heritage, on the other hand, posts the reserve on their site. I think this is good and I wish REA would adopt this method.

Jay, I notice the new avatar. Congrats?!!

Regarding the OP, every AH is different. The one thing that is consistent across the board is that reserves suck and they often discourage bidding.

Why reserve ? Just list it as Minimum bid !

Or let an actual auction take place???!!!

+1 Agree Cute Avatar and Reserves are double edge sword it maybe good for the consignor to protector their investment if they are worried about what it might go for in a bid but on the flip side it does discourage some bidders which might actually limit the items potential

Then, you have the “hidden reserve”. RR auctions does this, and the rules of many others at least allow it. This is where there is no indication on the listing that the consignor has a minimum they will take, and the auction house just places bids up to that minimum without it ever being disclosed. In my opinion, this should not be allowed under law.

If you ever get a call from an AH saying “hey you were the under bidder on lot X and it can be yours at your last bid” it’s very likely because the AH was unable to run bidders up high enough to the hidden reserve.