Auction Houses - Showing Estimates
 

Hi, I have a question and would like to get some thoughts. I am currently looking at Heritage Auctions Live and I think with all of their auctions they have an estimate next to each item.

By doing that do you think that influences what you should bid on it? I mean I know you are only going to bid what you want to pay, but does this provide a little bit of influence, like if u see something estimated at 4000-6000and your thoughts are u would only bid 2000 on it, do u then not even bid.

Or if an item falls short of their estimate do u then think u got a bargin. and vice versa.


I'm just curious as to why some auction houses do that and others do not?

There's a bat in there, Kiner's 1949 all-star bat. I owned it several months back and sold it for like $3,500 which was supposedly a good price for it. But now it has a letter of provenance from Kiner and it's estimated at 8-12K. Cause I guess they had Kiner signed alittle piece of paper after 62 years.

I know it has nothing to do with your question, but thought id share.

It's an interesting subject and one that I have been debating in my mind for a week now, as I have a few items listed with Heritage for the first time.

I believe the posted estimate can be a good benchmark for the prospective purchasher....providing that it is based on past sale prices of like items (an apples to apples comparison).

Market and collector influences will no doubt dictate if an item falls short, meets or exceeds advertised estimates, in each particular case; but I do believe that the posted estimate will have a price altering effect more often than not.

As a seller, I am kicking myself for not suggesting to the auction house that they might look look at an estimate descriptor utilized for one of my items, more closely.

To explain - I have consigned a item that is very uncommon and it, nor others like it, have not been publicly auctioned before; yet the estimate has defined low price and high price demarcation points advertised (i.e. $xxxx - $xxxx)

The estimate in this case is no doubt an honest benchmark but has to be based upon sales of somewhat similar but still distinctly different items; coupled perhaps with the purchase price(s) of similar item(s) that sold privately (if this info is indeed known).

My point being - private sale prices are not necessarily subject to the effects of true market price correction and may be drastically over or under inflated due to the motivation of the two parties involved.

As my item is the first one of it's type to be "fought over" in a fair market setting I might have been wise to suggest that an open high estimate range be considered (i.e. $xxxx + instead of $xxxx - $xxxx) as there is no way to know exactly what the item will truly bring at auction.

While bidding activity could certainly drive pricing of my item well beyond the high estimate, it would be naive to believe that the estimate will not give some prospective buyers reason to pause and perhaps limit bidding.

I do want to state that I am quite pleased with Heritage's efforts on my behalf and I am positive about the potential auction outcome being satisfying to the purchaser, Heritage and to myself.

I've never understood the purpose for either the auction house, consignors, or buyers in the practice of volunteering estimates of any kind. I have had this explained to me by several auction house honchos, something about "guidance for the buyers," but I've never thought it made much sense. Are you trying to establish a floor for the items, or a ceiling? And why is it the auction houses business either way? I just don't see an upside for anybody. And the estimates are so wildly wrong for so many items in any given auction, you'd think that would have eliminated the practice long ago. I'd love to hear some reasons why this is helpful, and to whom.
Hank Thomas

My impression is that most auction houses list a lower than expected estimate so that when the realized price blows away the estimates...they can boast that their auctions beat their estimates by such and such a %.

Some list it as part of their service to offer the seller an advance based on a percentage of the estimate. I think REA does this.

That does seem to be the case more often than not, but how does that make them look good when they're the ones making the inaccurate estimates in the first place? And how does that make buyers feel, now that they have paid more than the "experts" predicted the item would go for? How can that not have at least some depressing effect on the bidding when it's close to or past the high end of the estimate and bidders are trying to decide whether they should go another bid or not? I'm still struggling to understand the benefits of this common practice.

I rarely pay attention to estimates, which may suggest that consigners should be overly concerned how estimates effect bidders. At best, they're like someone quoting Beckett book price in an eBay auction. Even if hi Becket is helpful to know, you don't actually use that as your bidding marker.

Some estimates are goofy and some are dubious, so it's hard to take them too seriously.

The subject of estimates versus realized prices would make for an interesting article.

estimates
 

Most seasoned collectors will pay what they will based on experience and how badly they want the item. I pay very little attention to estimates. I have seen item estimates that were $500-$800 go for 15k, and not as bad the other way, but still quite far off. I think it does allow the auctioneers to say they beat the estimates. As a practice we don't do that in our auctions but I understand the philosophy. Kind of like the "best offers" being discussed on the other thread, just not that big of a deal.

So the only purpose of estimates is so the auction houses can brag that the item beat the estimate they came up with?

Hi Hank
It's called "marketing" :) and yes, I think that is part of the reason, not all of the reason. Estimates can be a guide for less experienced folks, I guess, though they are often way off.

Estimates could be a useful tool, but most of them do not reflect the actual value of the piece in question. Typically, the estimate is low, so that the auction house can far surpass it.

But for an auction house that allows reserves, the estimate may offer a clue with regard to that reserve. Maybe a lot with a $4000-6000 estimate can't sell for less than a $4000 bid. Not sure about this, but it might have some merit.

As others have pointed out, experienced buyers are paying no attention to the estimates. So that leaves inexperienced buyers--but if they are supposed to be guided by the low end as a floor, that means they are also being guided by the high end as a ceiling. And that's exactly what concerns me as a consignor. And Leon, what kind of marketing is it to consistently demonstrate an inability to estimate the actual value of the items in your auctions? Maybe I'm just obtuse, but I'm still not understanding the value of this practice to anybody involved.

An essential problem with auction estimates is you can't be sure the auction is even trying to give accurate numbers. Accurate prices often isn't their intent. This alone makes them unreliable. I also think this makes them often unethical.

Even when they are way off, there's supposed to be objectivity in these estimates. They aren't supposed to be a PR tools. They aren't supposed to be fibs.

And there's nothing wrong with not having auction estimates.

To me they serve several functions, all of which are purely marketing and none of which have much fact-related basis:

1. By providing a lower estimate it encourages people to bid, once people are engaged they are more likely to keep bidding. The more bidders the better chance an item has for selling for more.

2. As pointed out it allows the house to say they "exceeded, blew away, surpassed" the pre-auction estimate when in reality it often appears to be little more than a number pulled out of a hat to serve a purpose.

3. In some instances they may serve as a way to subtly communicate the level of the reserve (obviously the high end of the estimate).

I pay no attention to them, if I want something I am going to pay what I have to pay up to a point. The reserve has absolutely no impact on me unless it is leading others to bid against me.

Leon is right, it's marketng plain and simple, no science. It's another part of the snake oil charm of this hobby.

Heritage Live
 

I'm watching now and seeing almost every item go well below the estimate, so now my thinking is the estimate are there to get people to bid to that level, but it sure isn't happening, One item had an estimate of 10 grand, it just sold for only 2000.

That or they have really bad estimaters working for them.