Auction Company Games: Question

RKKay

I spoke to a dealer today who said he was p.o.'d at a couple auction houses to whom he'd consigned clients' coins. The coins (about 10 to 15 of them) all sold at the reserve price. No big deal in my eyes. What irked him was that he subsequently saw some of these coins in the auction houses' wholesale divisions' inventories. I don't know his buyback or % of hammer. Your thoughts as to the purchase of these coins by the auction houses?

tradedollarnut

No problem as long as the descriptions and pictures were to his liking.

mdwoods

I guess if no one else bids it's probably acceptable, except it seems like the auction house shouldn't take a commission. Or maybe half the regular percentage.

RKKay

As Mark points out, should the auction company take their full %, or is that just getting a discount? If it is just a discount, is it okay, assumming the cataloguing and pix were to his liking, as Bruce says?

JrGMan2004

I think that if the coin sells at the Reserve price to the auction house, that they should not charge him for their service... their service is to present and sell the coin at auction to collectors and dealers. The service is not to show off a coin and then for the company to buy the coin at the reserve price. It's like... should a dealer outright buy a coin for himself that has been given to him to sell on commission? I don't think so, and the auction houses probally shouldn't either.....

coinguy1

As long as the auction house represents the coins fairly and accurately (and doesn't try to discourage others from bidding against them in the hopes of getting a good deal), I think it is a positive, not a negative for them to bid. That only increases a consignor's chances of getting more for his coin.

If the auction house wins the item they should be perfectly free to price it at whatever level they choose and the commission rate charged to the consignor should not be affected.

Edited to add: If the auction house is asked to comment on or provide suggested reserve prices and might later be bidding on such items, it is obviously imperative that they act objectively and honestly.

JrGMan2004

But Mark, would you outright buy a coin that someone sent to you on commission?

coinguy1

<< <i>But Mark, would you outright buy a coin that someone sent to you on commission? >>

George, I would tell the client what I thought I should ask for the coin and discuss it with him/her.
If for some reason I had interest in buying it for myself, I would let him know.

If I thought it should be resubmitted or consigned to an auction house rather than my offering it for sale, I would tell him/her that too.

But, I don't think that is the same situation as consigning a coin to an auction company and being concerned with whether they or someone else end up being the high/winning bidder.

RKKay

<< <i>But Mark, would you outright buy a coin that someone sent to you on commission? >>


I actually would. I currently have a coin on consignment, and the seller has given me a bottom line price. I've been straightforward with him as to my efforts, and he is willing to have me buy for that price. I also am often offered coins in the alternative: on consignment or outright purchase.

RBinTex

I don't think it's right for auction house to buy coins at reserve AND take commission. On an even higher level, also think it's right if the auction house helped set the reserve in such a range of tightly traded coins that with the buyers fee they were overpriced but without AND with the commission "discount" they may have been a rip.

Lakesammman

What Coinguy said.

JrGMan2004

<< <i>

<< <i>But Mark, would you outright buy a coin that someone sent to you on commission? >>


I actually would. I currently have a coin on consignment, and the seller has given me a bottom line price. I've been straightforward with him as to my efforts, and he is willing to have me buy for that price. I also am often offered coins in the alternative: on consignment or outright purchase. >>

Ok, it's one thing if it's discussed before hand... so, I guess I'd have to look at the consignment contract... but, I think that if they want to bid on their own auctions like that, that it should be in the contract... the difference seems to be, that the auction house is buying at the reserve without informing the consigner before hand that that's a possibility if the coin doesn't otherwise sell, where as you and Mark have said that you would discuss the option before hand...

RKKay

I agree that Mark's and my scenarios are different from the auction house scenario. The only issue I would have, and I thought was a great debate topic, was the purchase WITH the auction house's % subtracted.

JrGMan2004

I think it's kinda cheap... they don't have to factor in a buyers fee, and they still get paid for putting the coin up, and then they profit more from selling the coin?! And they can even sell it (Depending on the reserve) at the reserve price, and still make money (Basically get the sellers fee twice)

Sry... flawed logic above... but still... they get it at the reserve minus the sellers fees, and then can market it up... I think it's dishonest if they don't disclose before hand that they can buy a coin at the reserve if it doesn't sell to another party...

RKKay

I agree with that reasoning, and I wouldn't do it. Maybe that's why I'm a small-time dealer. However, the other side of the coin (excuse the pun) is that the consignor got his reserve.

Conder101

<< <i>I actually would. I currently have a coin on consignment, and the seller has given me a bottom line price. >>


But would you buy it at his bottom line price and then charge him the commission fee? (In effect getting the coin for less than his bottom line price.)

The only real problem I see is that the auction house does have an unfair advantage over the other bidders in that they don't have to figure the buyers fee into their bidding strategy. If a dealer buys a coin for $1000 he has to pay $1150 for it and has to consider that added expense when he is determining what he will be able to sell it for. The auction house can bid it to say $1100, out bidding the dealer, and still get it for less than the dealer would have paid.

RKKay

<< <i>But would you buy it at his bottom line price and then charge him the commission fee? (In effect getting the coin for less than his bottom line price.) >>


Never, but that isn't what is happening with the auction house. On the other hand, I agree with you 100% that the auction house has an unfair advantage over true bidders.

morgannut2

Because the auction house has an "unfair" advantage, and a sale price is determined by the underbidder not the buyer, the bid by the auction house increases the ultimate amount that a seller might recieve. But,I wonder if the reserves were so close to wholesale at the opening bid, that retail bidders didn't get involved in the competion to "win" the auction. That is one reason some sellers will "shill" bid rather than place a reasonable reservefor a starting bid.

RKKay

The story I heard was the auction house bought at the reserve prices. This raises the question as to whether the consignor should be upset at all, considering the coins wouldn't have sold were it not for the auction house.

Conder101

<< <i>Never, but that isn't what is happening with the auction house. >>


Actually it is because the coins were bought from the auction at the reserve so the auction house still collected the sellers commission from the consignor. At least that is how I interpreted it. (Still the consignor has no reason to be upset since he got the same amount from the sale of the coins as he would have if another bidder had bought them at the reserve. In fact if the auction house hadn't bought them he might have had to PAY a buy back fee.)

coynclecter

I would be much more concerned about the description of the coin when the auction house owns it. Personally I think having the auction house participate in thier own auction violates thier role as a neutral party but I see how they can make big bucks at it so its unlikely to change.

I've often wonderd how many of the overgraded items were owned by the auction houses while they were undergrading the consignments. The potential for abuse is way too great. But hey, greed, customer abuse and conflict of interest seem to acceptable in the coin business.