Auction House Clarification

[scgaynor]

I started a new thread for this instead of posting in the other one about Heritage and undisclosed reserves as I didn't want it to get lost. There seems to be alot of misunderstanding about what an auction house can and can't do legally.

I didn't know this until I got my auctioneers license last year, so my guess is that it is not common knowledge.

When a licensed auction house or auctioneer is holding a live auction (one in which people are attending to bid), all lots are assumed to have reserves unless otherwise noted. Unless the auction is identified as an "absolute" auction, you should assume that there is an undisclosed reserve. It does not have to be stated in the auction terms that there are reserves. The assumption by the state is that since the auction is being conducted by a licensed auctioneer, that it is being conducted ethically. Different auction houses do things in different ways. Some will place "house" bids, some will start the item at the reserve and some will take bids for as long as possible and then state "there is a reserve on this item of X, do I have a bid of X?".

Heritage uses licensed auctioneers so they are within the law to have undisclosed reserves and it is not considered unethical to use them either (at least within the auctioneers code of ethics).

If the reserve is not met, the auction house should not include the price realized as an actual sale in their records. Sotheby's got in trouble for doing this years ago.

Most of the smaller local auction houses run few items with reserves as it only causes problems, but when you deal with the big auction houses (the real high end guys), pretty much everything has some sort of undisclosed reserve. Very few people are going to give their several million dollar item to an auction house and just hope that they get a good price.

The same rules do not apply to catalog/internet auctions held by unlicensed auctioneers or auction houses. My guess is that as long as they state in their terms that there are undisclosed reserves it is legal for them to place "house" bids.

Scott