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  #1  
Old 12-07-2021, 09:13 AM
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Rhotchkiss Rhotchkiss is offline
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Default Auction Houses with Hidden Reserves

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). 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.

Last edited by Rhotchkiss; 12-07-2021 at 11:48 AM. Reason: To correct a mistaken fact
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  #2  
Old 12-07-2021, 09:40 AM
spacktrack spacktrack is offline
Brian Dwyer
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I agree that not disclosing an item has a reserve is poor form, and publishing price realized in those instances where an item actually did not sell is wrong, but I just wanted to drop in a point of clarification as REA uses reserves so very infrequently that it may not be top of mind how exactly they're used here. (For those curious, REA offered 20,312 lots this year and only 38 had reserves.)

REA does not ever place bids on a house account, in any circumstances, and does not ever move up a bid to one increment below a reserve amount to simulate interest in a lot.

If an item has a reserve, it is noted on the item page and the status will not change until the reserve is met. If an item has a $10,000 opening bid and a $25,000 reserve, but bidders only bid up to $20,000, that will show as the last bid with the reserve not met and the item will not sell. Similarly, if an item gets the $10,000 opening bid, that will show as the last bid and the item will not sell. REA does not move the bid up to $24,500. Reserve amounts are always available upon request.


In our terms, these issues are addressed:

10. Each item in the auction is accompanied by an opening bid. Select items may have a confidential reserve placed on them by the consignor. These
items will be clearly designated as such on the individual item pages online. Until such time that the confidential reserve is met, the item page will
display “Reserve Not Met” directly underneath the current bid. Bidders may continue to bid on such items using all available bid increments. Once
the confidential reserve is met, the status of the item will change to “Reserve Met” on the item page. Reserve amounts will not be disclosed on the
item page but are available upon request. Items with a confidential reserve may be accompanied by an estimated value. The confidential reserve
amount will be lower than or equal to this estimated value.

13. There is no circumstance under which Robert Edward Auctions may execute bids on its own “house account,” thereby unfairly competing with
bidders. In fact, to be clear, Robert Edward Auctions does not even have a “house account,” unlike many other auctions.


Brian
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  #3  
Old 12-07-2021, 10:07 AM
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Peter_Spaeth Peter_Spaeth is offline
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It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.
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My avatar is a sketch by my son who is an art school graduate. Some of his sketches and paintings are at
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He is available to do custom drawings in graphite, charcoal and other media. He also sells some of his works as note cards/greeting cards on Etsy under JamesSpaethArt.

Last edited by Peter_Spaeth; 12-07-2021 at 10:08 AM.
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  #4  
Old 12-07-2021, 10:17 AM
Prof Prof is offline
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Quote:
Originally Posted by Peter_Spaeth View Post
It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.
I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.
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  #5  
Old 12-07-2021, 10:22 AM
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mrreality68 mrreality68 is offline
Jeffrey Kuhr
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Quote:
Originally Posted by spacktrack View Post
I agree that not disclosing an item has a reserve is poor form, and publishing price realized in those instances where an item actually did not sell is wrong, but I just wanted to drop in a point of clarification as REA uses reserves so very infrequently that it may not be top of mind how exactly they're used here. (For those curious, REA offered 20,312 lots this year and only 38 had reserves.)

REA does not ever place bids on a house account, in any circumstances, and does not ever move up a bid to one increment below a reserve amount to simulate interest in a lot.

If an item has a reserve, it is noted on the item page and the status will not change until the reserve is met. If an item has a $10,000 opening bid and a $25,000 reserve, but bidders only bid up to $20,000, that will show as the last bid with the reserve not met and the item will not sell. Similarly, if an item gets the $10,000 opening bid, that will show as the last bid and the item will not sell. REA does not move the bid up to $24,500. Reserve amounts are always available upon request.


In our terms, these issues are addressed:

10. Each item in the auction is accompanied by an opening bid. Select items may have a confidential reserve placed on them by the consignor. These
items will be clearly designated as such on the individual item pages online. Until such time that the confidential reserve is met, the item page will
display “Reserve Not Met” directly underneath the current bid. Bidders may continue to bid on such items using all available bid increments. Once
the confidential reserve is met, the status of the item will change to “Reserve Met” on the item page. Reserve amounts will not be disclosed on the
item page but are available upon request. Items with a confidential reserve may be accompanied by an estimated value. The confidential reserve
amount will be lower than or equal to this estimated value.

13. There is no circumstance under which Robert Edward Auctions may execute bids on its own “house account,” thereby unfairly competing with
bidders. In fact, to be clear, Robert Edward Auctions does not even have a “house account,” unlike many other auctions.


Brian
Agreed Brian and that is why REA is one of the most respect AH's and gets some of the greatest items to auction
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  #6  
Old 12-07-2021, 10:51 AM
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Lorewalker Lorewalker is offline
Chase
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Quote:
Originally Posted by Rhotchkiss View Post
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.
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.
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  #7  
Old 12-07-2021, 11:17 AM
Aquarian Sports Cards Aquarian Sports Cards is offline
Scott Russell
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Location: Pennsylvania
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Quote:
Originally Posted by Rhotchkiss View Post
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).
To be crystal clear I can explain it. I in no way condone it or practice it!
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  #8  
Old 12-07-2021, 11:18 AM
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Peter_Spaeth Peter_Spaeth is offline
Peter Spaeth
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Quote:
Originally Posted by Prof View Post
I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.
No doubt you are right about the reasons for not doing it that way.
__________________
My avatar is a sketch by my son who is an art school graduate. Some of his sketches and paintings are at
https://www.jamesspaethartwork.com/

He is available to do custom drawings in graphite, charcoal and other media. He also sells some of his works as note cards/greeting cards on Etsy under JamesSpaethArt.
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Old 12-07-2021, 11:21 AM
Aquarian Sports Cards Aquarian Sports Cards is offline
Scott Russell
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Quote:
Originally Posted by Peter_Spaeth View Post
It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.
Partly auction psychology. People feel a sense of ownership on items they bid on, so you want a lot of bidders. The other part is end of auction. If you have a $12000 item where you start the bidding at $10,000 you shut a lot of people out of extended bidding. If you start it at $25 with a $10,000 reserve you'll have a lot more eligible bidders (all this is based on only previous item bidders being eligible in extended bidding) Of course you could always start it at $25 with no reserve and trust the process, but who would do that?
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Check out https://www.thecollectorconnection.com Always looking for consignments 717.327.8915 We sell your less expensive pre-war cards individually instead of in bulk lots to make YOU the most money possible!

and Facebook: https://www.facebook.com/thecollectorconnectionauctions
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Old 12-07-2021, 11:50 AM
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Rhotchkiss Rhotchkiss is offline
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Brian, my bad. I corrected my initial thread. Regardless, the point remains true that how REA handles reserves if fair and ethical, unlike other AHs who use hidden reserves.
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