Reserve Clause

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Posted By: Bruce Dorskind

One of the most celebrated causes in our hobby is the need
for transparency.

Whilst we are certainly advocates of transparency and foes of
shill billing etc, we wonder about the extent to which
reserves and minimum bids impact bidding. and ultimately
the final price of the item.

Recently, we wanted to consign 5 items with an VCP value ranging
from $600 to $1000 to a well known E Bay auctioneer. He refused
to take the items because we wanted a reserve of 60% of the VCP value.

In theory, especially in these uncertain times, each item could have
sold for $100 or less- which was going to be the opening bid.

The dealer told us that reserves or minimum bids above 1/4th the projected
value discourage bidding.

REA Auctions appears to have opening bids at 1/4 to 1/5th of the eventual price
realized. Other auction houses have which do not have a reser,ve open at 1/10th
to 1/3rd the estimated value.

In your view, does a fair minimum book discourage bidding?

Why are auction houses so against the idea of a reserve on E Bay?

Given the uncertainty of the market- how does one protect oneself from
giving away a card?


Bruce Dorskind
America's Toughest Want List

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Posted By: barrysloate

Bruce- all good questions.

When I take consignments on ebay I insist on starting them all at $9.95 with no reserve. The reason is that every lot demands a certain amount of work and I do not want to see a lot pass, and then returned, because a high opening bid scared bidders away. If consignors need high starting bids, they are free to find another venue to sell.

I start my catalog auction minimums very low, often less than a quarter of retail, because bidders need to qualify and I don't want to discourage anyone from jumping in. The more bidders who qualify, the greater likelihood of competition at the end.

I think collectors prefer to see many bidders on a lot than hardly any. Psychologically one feels that if nobody else is bidding, the starting price may be too high.

There are many other business models but that is mine. Obviously, with the changing economic landscape there is a possibility I may have to make some concessions, but this is how I do it now.

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Posted By: Ed Hans

I agree with Barry's post above. In theory, If we assume the VCP is an accurate price guide (which I do not doubt), one should have little trouble fetching 60% of "book" for their cards regardless of the presence of a reserve, since the VCP is based primarily on auction results. Two caveats should be understood-1) No price guide can be completely up to date on all prices across the board. Markets fluctuate, sometimes dramatically (as we have seen this week), and prices realized last month, or even last week, may not be realized today for a variety of reasons. And 2) When selling the extremely high end material at auction, one needs to have two well-heeled collectors in competition for that material.

Basically, if the sales medium (auction, catalog, show etc) reaches a broad enough segment of the hobby, your cards should fetch "market price" regardless of what any price guide says.

As far as reserve auctions go, I tend to avoid them as most seem to be retail listings in disguise. When bidding in an auction (excepting those for extremely rare, one-of-a-kind items) the buyer is typically seeking to pay the lowest possible price. Ebay has become a haven for bottom fishers (myself included) just looking for bargains.

So how does one protect oneself from getting lowballed on their quality merchandise? 1) Don't sell when the market is depressed, and 2) make certain that you are reaching your target market segment.

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Posted By: LetsGoBucs

As an occasional bidder/buyer, I totally avoid any auction on ebay that looks like an attempt at retail sale.

I'm probably too old fashioned, but to me an auction is fairly simple....high bid wins. If the high bid is .99 then thats what the card is worth. If the high bid is 5,000 then that is what it is worth. I have no issue with people that want to sell their cards retail. Build a website, open a store, do a show, go door to door, whatever - but please don't waste my time with fake auctions.

And that is why I will only look at auctions with low opening bids.

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Posted By: jdrum

is a very "fluid" term. Past results are just that past results. Today's "market value" is what the card would sell for today in an "arms length" transaction. If you choose your vehicle to best reach the segment of the hobby that you think will bring the best price, then what is sells for is the market price to me. If you think these are the days that cards are being "given away" I would say wait until another time to sell.

Just to add: I too tend to stay away from "auctions" with high openers, they are essentially a fixed price sale.

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Posted By: boxingcardman

to the issue is to charge you a reserve fee if the item doesn't sell because of your reserve.

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Steve Dawson

One thing I make a point of checking in an auction I'm watching, is the third-highest bid.

Say for instance, that you have a card, another example of which, recently ended on ebay with a high bid of $1,000. Second-highest bid was $975. The third-highest bid though, was only $280. In other words, two "gotta-have-it-at-any-cost" bidders went crazy in the first auction. Is your card worth $1,000 or is it worth only $280.

OK, now you put your card on ebay. Problem is, it might only sell for $300, since bidder #1 on the first auction is no longer in the game. Your card is now being battled for by bidders #2 and #3 in the first auction, and bidder #3 (who is now your bidder #2) is not willing to go to $1,000 since he's not in the "gotta-have-it..." crowd. If you set a reserve of $1,000, you might get lucky and the first auction's bidder #2 (your bidder #1) might hit it, but that's a BIG if; and even if your reserve is hit, savvy bidders will notice that your #2 bidder was only at say $300, and the only reason you got $1,000 is because it was a "reserve" auction, and you lucked out and drew a "crazy" bidder.

Now, say I have a third example of the same card, and I see that two examples of it have recently sold for $1,000 (and I don't understand the nuances outlined above), and I put my card on ebay. Problem is, I won't get that for my card, even with a reserve, since both bidders who were willing to go there, are no longer in the game. If I put even a $500 reserve/minimum bid (50% of it's "perceived value") it won't sell, and I'll be left out in the cold.

So basically, "value" is always a floating number. It's simply, as a previous poster mentioned above, what two people (buyer and seller) are willing/able to negotiate at any given moment in time.


Steve

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Posted By: Jerry Hrechka

Steve

Your analysis is correct. In the last 2 weeks a small group of high Number 1937 Wolverine Gum Ripley's BION PSA graded cards were auctioned off, on Ebay. I bought the first 2 (Probably over paid, but worth it to me). I didn't have enough money to bid on the next 2 that were auctioned off. A direct result of that (IMHO), is a PSA6 example selling for less than a PSA3 example.

There is a thread on the NonSport side, labeled 30's Ripleys Cards, where all the realized prices are listed.

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Posted By: barrysloate

Steve- that's a very good point, and whenever you see an extremely high bid on something, it is good to look at it a little more closely. The chance of that same high bid occurring again may be small.

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Posted By: Jeff Lichtman

Steve, great point.

Now imagine that the two whales that were battling it out for the card had checked VCP out beforehand and noticed that the card had just sold for $900 -- and that made them comfortable that a $1000 bid would be at least within the realm of value. But what if the $900 sales price was in an auction in which the consignor had his associate in his law firm pump up the bids in order to get a greater result? Or the auctioneer used the bidding ID of some 80 year old woman who worked in the company to shill the card as well? Now the value of the card is fraudulently set in perpetuity.

The point is that there are a myriad of possibilities beyond just the removal of one whale from the hunt which serve to artificially inflate the value of our cards in our collections. At some point, I'm afraid, the music will stop and we'll all be left holding very overvalued plastic.

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Posted By: Jim VB

<<At some point, I'm afraid, the music will stop and we'll all be left holding very overvalued plastic.>>


HAH! You make this sound like housing... er, I mean card, prices could go down!

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Posted By: Jeff Lichtman

Jim -- when card prices come tumbling down you can be damn sure that I will be blaming it on The Man!

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Posted By: Fred C

Bruce,

It's all a crap shoot right now. If the card is something in demand it will probably hit the 60% of VCP. The market has lost about 40% in the last year. If cards follow, then 60% actually seems within reason. If you can't tolerate the possible low final hammer then I'd just keep the cardboard. I'm not a big fan of reserves on ebay and there are many others that just wont bid on items with a reserve. You can always offer it at 100% of VCP in the BST. You could possibly sell it and save the consignment fee. By the way, is this just a hypothetical or do you actually have the cards for sale?

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Posted By: Ed Hans

To further illustrate Steve's excellent analysis, In may of this year a D304 Cy Young in PSA6 sold for over $80,000 in a well known auction. Allegedly there were three people bidding aggressively on it. In September another PSA 6 Young fetched only $18,000 in an equally well publicized auction. Part of the explanation for that result is that there was a PSA7 Young scheduled to end about two weeks later. That PSA7 went for "only" $24,000. It's easy to see the effect that one or two fewer bidders can have on high end cards.

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Posted By: barrysloate

Ed- those are drastically disparate results. It does make you wonder.

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Posted By: Jim VB

Jeff,

Maybe if we have one of those socialist Presidents in office we can look for a bailout package or even a Treasury Department buyout of our cards. (Oh wait. We have that socialist now!)


(Edited for clarity, because reading comprehension is not my stong point.)

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Posted By: Jeff Lichtman

Jim, I could use a bailout on some cards I have on ebay now. I also just ate a huge meal. I'd love it if I could get a government bailout as well.

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Posted By: boxingcardman

Although your wife and family may hate you afterwards...

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Bob Casmer

There's a flaw to Steve's analysis regarding looking at the third high bidder to determine the level of activity/want of a card in an auction. An awful lot of experienced bidders use snipe services nowadays. I can't speak for all snipe services but, the one I've used doesn't execute the bid if it is already less than the current high bid at the time it is to be placed. In Steve's analysis, say the second high bidder was watching the auction live and placed his bid with a minute to go. Any snipes previously set that were to be placed within the last minute probably aren't going to show in the auction results because of the timing. In this case, there could have been any number of bidders between the third bid and the second highest bid that just didn't register. As I said, I can't speak for all snipe services but, that has been my experience with the one I've used. That being the case, just looking at the third high bidder alone won't necessarily give you an accurate read on the market for that particular card/auction.

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Posted By: Matt

Bob - good point. I'd also add, that new bidders on an item (or more free cash) may have turned up since the last time the item was auctioned, and it could sell for more then it did the last time.

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Posted By: Steve Dawson

Great point Bob...Thanks!


Steve