Auction Reserves - let’s discuss

[mrreality68]

I am not a fan of reserves but I can understand its usage in some cases.
Especially if the seller has a lot into the card. We all know these posted prices of cards sold publicly but do not know if the cards sold privately and if the seller has significant invested in it and is afraid of a loss. Perhaps the seller is “attached” to the card and is not willing to sell unless their price is met.

When you sell privately you have a price that you are willing to sell at and if others give offers you are not happy with you as the seller say No. you control your reserve since you decide when to sell it.

So if the seller wants to have a reserve and if the auction house agrees to it and they negotiate whatever they negotiate then they are all just playing by the agreed upon rules.
We may not like it but it is the right of the seller to sell or not sell as he chooses.
I agree with most no reserves usually means more bids and hopefully higher sale prices.
And as mentioned many auction houses do not do reserves and sometimes loses opportunities to sell certain items. Again there choice to have their auction there way.
Would love to see those items sold and go to a good collectors home. But potentially not and potentially redone another time.

[raulus]

There do seem to be different mechanics when it comes to applying reserves, which I think can lead to different results.

For example, some auctions advertise that there is a reserve from the start. Others wait until a couple of days before closing before disclosing that there is a reserve, and often even telling you what that reserve actually is.

My experience is that having an unknown reserve (i.e. you know there's a reserve, but have no idea how big it is) from the start has a chilling effect on the bidding, where many bidders won't even bother, because they assume the reserve is so high that it's impossible to get there. On the other hand, having a reserve that sneaks up on you suddenly a couple of days before closing can also stifle bidding, but at least it gives the market a chance to first see if it can clear the reserve before it ever kicks in. Plus if you know what the reserve is, then you can always make an informed decision about whether it's worth continuing to bid, or whether you should just abandon all hope.

Some auctions will basically let you bid at the reserve price unilaterally. Others require that you need a partner in crime to bid against you to get up and over the reserve price.

My experience is that if you need a partner in crime, then it's probably game over, because you can put in a fat bid, but when everyone else gives up, then forgeddaboutit. If you can hit the reserve price unilaterally, then at least you have the option to go there if you really want to.

I've recounted the story here before (although I can't seem to find it to just copy/paste now) of a 52B Mays in PSA 9 that went to auction in late 2021/early 2022. It first came to market with a reserve. Bidding was going strong, and reached $100k+. Then the reserve popped at $200k ($240k with the juice) a couple of days before the auction finished, and everyone gave up. Since this was one of the AHs that let you unilaterally bid at the reserve amount, I toyed with the idea of putting in a bid at $200k, but couldn't bring myself to do it. Naturally, it went unsold.

A couple of months later, the exact same card on the exact same AH platform came up again, this time without a reserve. Things went similarly up until the last couple of days. No reserve this time. And then the price went absolutely nuts in the last day. Price doubled, then doubled again. Next thing you know, the final price (with the juice) ends up at $444k.

Bottom line for me is that if you're going to do an auction, then do an auction. Adding a reserve just seems to really screw with the whole flow and animal spirits that are the key element in the auction format. If you really want the certainty of getting your sales price, then sell it using a BIN, a private sale, or a high starting bid on eBay. Trying to get the best of both worlds seems like you end up getting the worst of all worlds.

[parkplace33]

Great post and commentary here. A few thoughts:

4) I am still perplexed at collectors seeming infatuation with auction houses for a large majority of the items that get sold there. For cards with a good supply and an easily established "market price", an educated collector could get more $$ consigning privately (shameless plug), or the same $$ selling outright to a reputable dealer wanting said card(s) for their inventory.

Howard, I don't get either, but they have now set the standard for everything. Have a bin full of old tobacco cards? Send it to an auction house. Have a low grade Ruth? Send it to an auction house. Collectors and consignors are now bound by this process for a majority of cards and the AHs know it. Why do you think they are set up at every major card show? To show off upcoming sales but also take in consignments.

I understand the attraction of a reserve for the consignor, and I have often considered one when I consign. But then I recall a story by one AH owner who recounts when he tried to convince the consignor not to put a reserve on a lot, the card did not sell at the reserve, the consignor was mad so the AH purchased the card for the reserve amount, the AH then put the same card in its next auction without reserve and it closed well above the reserve amount.

Ryan, I think consignors set a reserve for a lot of factors, but I think the number 1 reason is fear. They are fearful of selling the card and not getting what they think is the value of the card. So they set the reserve. If it hits, great. If not, great, still have the card.

One last thing to consider - Heritage makes the consignor pay the BP on all amounts that do not meet their reserve. So, even if the consignors are getting 50% of the BP on the Mantle and Young, they will fork over $20k+ likely to watch their item not sell; this is the second time the Young consignor will suffer that fate. Please note, this is not about Heritage - almost all AH’s will offer reserves and I expect most take a BP even if the item does not sell; it’s just that these examples are in the current Heritage auction.

They will never tell, but I would LOVE if we could get some truth on this from these AHs. I think in the past yes, but now a days? And again, everything is negotiable.

[Al C.risafulli]

We try and avoid reserves, but occasionally it's understandable (we've got two items in our current auction with reserves).

We periodically do customer surveys, just to make sure we're on the right track and we're meeting or exceeding the expectations of our bidders and consignors. We've asked questions about reserves, and found that 50% of our customers WILL NOT BID if there is a reserve - whether the amount of the reserve is disclosed or not.

Count me in the camp of folks that believe that low opening bids and no reserves is the best way to encourage bidders to get involved. In the eyes of most bidders, high opening bids and reserves are impediments, and I've got 11 years of anecdotal evidence to argue both cases.

When we do reserves, we insist that the reserve be a reasonable number, and then we disclose the amount of the reserve about a week before the auction closes, and then we bring the bid up to the reserve so that the next bid meets the reserve. Even still, sometimes items won't meet the reserve.

We do not charge the consignor the equivalent of the buyer's premium because we don't offer the use of the reserve as a way to go fishing for a high price. I understand a consignor wanting to mitigate downside risk by placing a protective reserve on an item, and I'm (reluctantly) happy to support that, even though I try and caution against it because I think everything that mitigates downside risk also reduces upside potential. We don't do hidden reserves, and we don't do "fishing" reserves, so there's no reason to charge the consignor, in our case.

-Al

[parkplace33]

Originally Posted by Al C.risafulli

We try and avoid reserves, but occasionally it's understandable (we've got two items in our current auction with reserves).

We periodically do customer surveys, just to make sure we're on the right track and we're meeting or exceeding the expectations of our bidders and consignors. We've asked questions about reserves, and found that 50% of our customers WILL NOT BID if there is a reserve - whether the amount of the reserve is disclosed or not.

Count me in the camp of folks that believe that low opening bids and no reserves is the best way to encourage bidders to get involved. In the eyes of most bidders, high opening bids and reserves are impediments, and I've got 11 years of anecdotal evidence to argue both cases.

When we do reserves, we insist that the reserve be a reasonable number, and then we disclose the amount of the reserve about a week before the auction closes, and then we bring the bid up to the reserve so that the next bid meets the reserve. Even still, sometimes items won't meet the reserve.

We do not charge the consignor the equivalent of the buyer's premium because we don't offer the use of the reserve as a way to go fishing for a high price. I understand a consignor wanting to mitigate downside risk by placing a protective reserve on an item, and I'm (reluctantly) happy to support that, even though I try and caution against it because I think everything that mitigates downside risk also reduces upside potential. We don't do hidden reserves, and we don't do "fishing" reserves, so there's no reason to charge the consignor, in our case.

-Al

Appreciate the ground truth, thanks Al.

[Exhibitman]

As long as the AH is a quality one (hi, Al), I don't see the need for a reserve. Word will get out to the necessary bidders and quality will bring quality 99%+ of the time. As a bidder, I am with Jay on the issue: I bid what I want and if the card doesn't work for the seller at that level I move on.

[MVSNYC]

Reserves deter bidding. Period.