Quote:
Originally Posted by Rhotchkiss
There are many new members lately, and I assume several of them are learning about auction houses and starting to participate in auctions. For the benefit of these folks (and others), this thread highlights and discusses the existence of hidden/secret reserves:
It is common for auction houses to allow consignors to put a reserve on a lot. Most auction houses will state, up front, on the listing, that there is a reserve and whether or not the reserve has been met. Often times, when a reserve has not been met and the auction is nearing its close, the auction house will disclose the reserve amount by making that the necessary next bid (see Heritage and REA). It is all very obvious and transparent. However, this is not how all auction houses deal with reserves.
Sometimes, auction houses will not disclose that there is a reserve, and, even worse, they will bid the item up to that non-disclosed reserve amount in an effort to get someone to bid that minimum. I think this sucks ass because it makes it appear as though other people are bidding on the item, when they are not. RR Auctions does this (from their terms and conditions):
11.3 Reserves
Lots may be subject to a reserve which is the confidential minimum price below which the lot will not be sold. Consignors may not bid on their own lots or property. RR Auction may, from time to time, bid on items that it does not own. RR Auction may execute bids consecutively or otherwise up to one bid increment below the reserve.
These auction houses rely on rules contained in their terms and conditions (like above) to justify their ability to bid on individual lots to push a card, artificially, to the minimum price its consignors want. The auction house has no interest in buying the item and has no intent to buy the item. This is literally the definition of shill bidding: "the illegal practice of a seller or a seller’s acquaintances placing bids on his or her goods in order to drive up the price". Yet, somehow, this practice is not legally shill bidding (enter Scott Russell with explanation).
Regardless, I think its a real shitty practice. First, because its literally a form of shill bidding. Second, because it makes a buyer feel like they have bested real suitors when they have not; instead, it was them against an auction house pushing a lot to a hidden reserve price. Third, it creates fake and semi-fake comps; they are fake when the "highest bid" is the AH and the lot does not sell but that fact is not designated in the listing and semi-fake when one person wins a lot for 2+ increments higher than a real buyer was willing to pay.
Feel free to use this thread to out auction houses with hidden/secret reserves and/or to tell your story about hidden reserves.
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Great topic. I can appreciate both sides though. Yes it is frustrating to bid on something with the intent of hoping to win it only to find out you are bidding against a hidden reserve. As has been pointed out here recently, hidden reserve by the house or not, consignors are engaging in protecting their material with more regularity than is comfortable.
I appreciate a house at least telling me that this is what they can, will or may do however that does not change the fact that I am competing with another bidder whose purpose is to simply drive the price up to a certain point. As pointed out, if something is only for sale at a certain price there has to be a better way of achieving that. I would prefer the item just start out at a high price, even if it does not "look good" for the auction format.
As a consignor I would hope to get as much as possible for my goods so if I had something special or something with a material value I could see wanting to use a hidden reserve. Rather keep it if it is going to sell for 50% of what I and the house feel it is worth.
And one final point, as far as how REA and HA do it compared to others I wonder if the differences is due to complying with the laws within each of their respective states? Over my pay grade to answer.