Code Cracked on Hidden Reserves- Iconic Auctions

[Rhotchkiss]

For years I have been watching and bidding in Iconic auctions. They often have some very cool entertainment stuff; they also have sports and other items. But I was always alarmed at how many items that “sold” showed up again, auction after auction (or several auctions later). I was also troubled by how current bids could be so high despite few bids. Ed D wrote a thread a few weeks ago about some other funky stuff. Anyway, this thread is not so much about Iconic as it is using them as an example of an auction house that uses hidden reserves and how to tell whether you are bidding against a real bidder or the auction house.

A hidden reserve is the minimum amount established by consignor and AH that an item will sell for. It’s a reserve bc it’s a minimum/floor. It’s hidden because it’s not disclosed, meaning bidders have no idea the reserve exists (unless/until the auction ends and the item does not sell). As a buyer and seller, I don’t mind a hidden reserve; that’s as much as I will say on the merits or issues of hidden reserves. To me, the issue is when the auction house can increase the current bid to, or closer to, the hidden reserve amount. Iconic does this.

Some states allow the auction house to place bids to increase the current bid amount to or closer to the hidden reserve. To me, this is tantamount to shill bidding because the bidders think that the current hammer reflects actual bids and not auction house increases. I do not understand how this is legal, but it is in some states (apparently in Arizona where Iconic is from).

I was looking at Iconic’s auction that ends tonight and I notice many items that have been in prior iconic auctions, including this awesome Ty Cobb piece that I have bid on many times: https://www.iconicauctions.com/Ty_Co...LOT187061.aspx

I would like to own this, but have no idea the real value since it’s been up several times and never actually sold. At this point, it’s a red flag item, as is several things in their auction. So I am looking at this item and I notice the opening bid was $2000, there have been 10 bids, and the current bid is at $9,202. Then I look at several other items that had $2000 opening bids and the current bids compared to number of bids don’t make sense. Below is a great example, using items with $3000 opening bids - they both start at $3000 and the both are sitting at $8,565, but one has 5 bids and one has 7 bids - how is this possible?? It’s not unless the auction house has increased the current bid to the hidden reserve. The problem here is that the $8,565 bid approximates where the items would be had they gotten 12 real bids - it’s not a round or obvious number that makes one realize it must be a reserve amount. Plus, there are at least 3 items in the auction that started at $3000 and are sitting at this very specific number of $8,565 (yet they have had 5 or 6 bids, not the 12 it would take to get to about $8,565).

Ok, so here is the point- I have figured out how to tell when you are getting played by an AH that uses hidden reserves and “bids” up the item to the hidden reserve. At least, I have cracked Iconic’s code:

Iconic uses 10% bid increments. Iconic shows the starting bid. Iconic shows how many bids have been placed, and luckily, these bids do not reflect auction house increases. So, it’s an easy math equation: starting bid x 1.1 x number of bids = real bid amount by real bidders (remember bid 1 is the opening bid amount so the first x 1.1 is actually the second bid). Let’s look at this Shaq item pictured below:

Starting opening bid is $20,000.
Bid increments are 10%
There are 4 bids
Current bid is $42,875

Bid 1 = $20,000
Bid 2 = $22,000 (20,000 x 1.1)
Bid 3 = $24,200 (22,000 x 1.1)
Bid 4 = $26,620 (24,200 x 1.1)

Yet the “current bid” is $42,875. That may be the hidden reserve. At the least, we know that over $16,000 of “bids” were placed by the AH and not real bidders; incidentally, 9 bids at 10% increments brings the $20k opening bid item to $42,872 - troublingly close to the $42,875 “current bid”

I will bid in Iconic because they have things I like and they send the items I win, quickly and safely, without issue, after I pay. But I am now more clear-eyed when I bid. And not just Iconic - when the opening bid and number of bidders is stated and there are bid increments, I can now determine whether I am bidding against other people or the auction house.

Ryan Hotchkiss