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Old Jan 6, 2009, 03:58 PM   #1
BeastCoins
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How do auctions work?

Hello fellow collectors,

O.k. - I've been to live auctions and I'm still confused. I'm looking at the prices realized for the NYINC Lanz auction from yesterday (man, they get those done fast!)

http://sixbid.com/nav.php?p=pr&sid=98

As per the link, "Unsold lots are available for sale at 80% of the estimate (plus buyer's premium)."

What I don't get is the fact that there are numerous examples where the winning bid is less than 80% of the estimate. What gives? Does the auctioneer just decide that if there is a warm body in the audience that offers less than 80%, they will take it?

Examples:


Lot 43: Estimate $5,000 - Realized $3,800 (76% of estimate)
http://sixbid.com/nav.php?p=viewlot&sid=98&lot=43


Lot 44: Estimate $30,000 - Realized $18,000 (60% of estimate!)
http://sixbid.com/nav.php?p=viewlot&sid=98&lot=44


Lot 83: Estimate $5,000 - Realized $3,000 (60% of estimate!)
http://sixbid.com/nav.php?p=viewlot&sid=98&lot=83

There are a bunch more like that. So, I guess the lesson is that attending the auctions in person or having an agent there can make all the difference in the world if you are looking for potential bargains!

--Beast
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Old Jan 6, 2009, 04:53 PM   #2
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Hi,

Surely it depends if there is a reserve (which needn't be a specific proportion of the estimate). No reserve then in the auction it could sell for anything. If there is a reserve there is auctioneers discretion to sell for a little less than the reserve.

The unsold lots it is again the auctioneers discretion to get what they can so long as reserve met. They may also have further instructions from the vendor to, say, waive the reserve or lower it to secure a sale after the event.

It may work differently if the auctioneer is also the owner of the lots being sold.
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Old Jan 6, 2009, 04:59 PM   #3
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Dear Beast,

Happy new year to yourself and everyone on the board. The same thing came up to me some time ago and I spoke to a friend who is also an auctioneer. He told me that even though they state the minimum bid is at 80% (which applies to most lots), some lots are sold below that because the consignor (who may also be the auction house itself) is happy to sell at that lower price. The opposite can happen as well where the reserve is at 90% the estimate or 500% the estimate. It all comes down to the book in front of them with the minimum limits.

I guess attending the auctions is always the best idea but I have placed bids below 80% via email and not sixbid as it operates with a set of criteria and have been successful is some instances. In addition, not all auction houses accept such bids but there is nothing to lose. Most UK ones do though.

Best wishes,

Geo
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Old Jan 6, 2009, 10:45 PM   #4
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Lanz has a curious system: the opening price is 60% of the estimate, but if the lot doesn't sell, you have to pay 80% after the sale, plus juice, to get it.
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Old Jan 6, 2009, 11:48 PM   #5
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It obviously pays to be in the room.

Several coins opened at lower prices than I was told they would open at based on the mail bids.

Point in case. A mint Agothokles tet had a bid of 10k before the auction started. It sold for $7,500.

My coin (the Ptolemy) had mailbids that would open the auction at $2090. It actually opened at $1,900.

There were a few coins (maybe 2 dozen) that had no bids and were passed initially and then when it was apparent that there were no bids, someone jumped in and grabbed them at 60%. I would love to know who bidder #77 was..................he grabbed many of the 60% lots. In addition to picking up some of the pricier coins.

Cogitos Pamphylia stater halted at $1,400 and was being hammered until someone spoke up and then the coin ran to over $3k............rapidly. Good for Jeff, bad for the bidder whio thought they won it at $1,400.

Auctions are funny animals. Coins that looked uninteresting went for multiples and interesting coins did not sell.

However, sitting 4 hours waiting for a late coin to come up, is tiring.

I want to thank Phil Davis for his insight. He was tremendously helpful.

BTW funny you should mention Lanz. I developed an odd but beneficial relationship with their representative. It appears that there is still a very competitive spirit between dealers. If I didn't win my ptolemy, I am pretty confident Lanz would have found me a suitable replacement quickly.

BR

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Old Jan 7, 2009, 03:19 AM   #6
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Quote:
Originally Posted by 4to2centophilia View Post
It obviously pays to be in the room.

Point in case. A mint Agothokles tet had a bid of 10k before the auction started. It sold for $7,500.
Mmm..Is open to abuse that one. Did someone cancel their bid, was it a mistake? If someone placed a mailbid of say USD11k because of what they saw, would the auction have emailed back & said 'oh by the way the bidder withdrew/mistake' and your bid is reduced to USD7.5k?'. Or would it have stayed at USD11k...

Or was a bid of USD10k in place that reduced to USD7.5k which seems not to work out mathematically?

Overall, I would like to see independent auditing of auctions. It would cost and the auctioneer houses may say 'have to charge more fees' - they could on the otherhand reduce the decadent profits. Moral question that one, not dissimilar to the issue facing the worlds financial industry

Awaiting backlash!

Brgds

Alex
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Last edited by AlexB : Jan 7, 2009 at 04:16 AM. Reason: thought more about it..
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Old Jan 7, 2009, 07:24 AM   #7
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Well, I would hope that if I had put an $11k bid on a coin with an opening bid of $7,500 and no one else bid on it that I would get it for $7,500. Or if there was one other bid at $8,000 that I would get it for $8,250 (or $8,500, whatever the interval is). Doesn't that make sense? Or is something else meant here?

Richard
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Old Jan 7, 2009, 07:56 AM   #8
4to2centophilia
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Quote:
Originally Posted by hydatius View Post
Well, I would hope that if I had put an $11k bid on a coin with an opening bid of $7,500 and no one else bid on it that I would get it for $7,500. Or if there was one other bid at $8,000 that I would get it for $8,250 (or $8,500, whatever the interval is). Doesn't that make sense? Or is something else meant here?

Richard
After thinking about it awhile, I came up with a scenario that could make sense and be perfectly fine.

Under bidder has a starting bid of $5k with a max of $7250. Second bidder is $6k to 10k and a third bidder is at $9750.

In this case the opening bid would be $10k. If the second bidder withdraws the bid, then the opening bid is $7,500.

Those increments may be wrong (might be $500 increments over $5k), but you get the idea.

I have withdrawn on-line bids (with some success). It could be very possible that someone won an earlier coin and then withdrew their bid on this coin because they ran out of cash.

I think (could be wrong) that you have a better chance bidding on a coin late in a show since people do win earlier coins, and bidders start to drop out.

By 11pm, about half the people standing and sitting had left the auction.

I do know that the people I talked with thought the Ptolemy would go for $3-4K based on the condition and the bidding going on. But by 11pm, I think folks ran out of juice.

BTW the only time I have ever gotten coins at auction NOT at my bid max, was when I went to the auction.


BR

Mark
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Old Jan 7, 2009, 03:34 PM   #9
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Quote:
Originally Posted by curtislclay View Post
Lanz has a curious system: the opening price is 60% of the estimate, but if the lot doesn't sell, you have to pay 80% after the sale, plus juice, to get it.
Ahhhhhh.....clever! Didn't know that. If I could have bid 60% of estimate, I would have faxed over a sheet! The things I don't know some times.

Thanks Curtis!

--Beast
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Old Jan 7, 2009, 08:19 PM   #10
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Quote:
Originally Posted by hydatius View Post
Well, I would hope that if I had put an $11k bid on a coin with an opening bid of $7,500 and no one else bid on it that I would get it for $7,500. Or if there was one other bid at $8,000 that I would get it for $8,250 (or $8,500, whatever the interval is). Doesn't that make sense? Or is something else meant here?

Richard
Hi Richard

For the scenario described my concern is transparency. Who has dealt what, what is the situation if I am to deal, whats the bottom-line. Bids kept hidden make life hard. I dont know what has happened here, how I am therefore able to make a well thought out decision in bidding for a coin? You could maybe say that transparency would allow some to abuse the system..I dunno but I'd take my chances more equally.

For my last comment, I guess I am responding to current market events and economic reality. Trying to be philosophical but also sulking a little LOL and thinking aloud about the coin 'industry'. I apologise in advance, dont take me too seriously. Or do, up to you. At least think about it, come to your own conclusion.

In various financial cases recently, companies have been forced by market conditions (it doesnt 'out' when markets are strong - people are busy/distracted/making too much money/apathetic) to admit mass fraud (Madoff/Satyam in India), mistakes (Citic Pacific) and the promotion of interests of a select few over the rest - collusion (too numerous to list). Trust has been blatantly broken, liberties been taken, people have been taken for a ride, in some cases even despite professional oversight. The relevance here is that my gut feeling is that the coin 'industry' is in danger of being in the same situation. Is there is potential for mischief? Would oversight help? Has it happened before?

The egotistical nature of any individuals and companies without proper oversight and that are dominant in their field, that have made 'super normal' profits in a relatively short time period, that answer to no-one - spells trouble. The moral grounds for keeping things on the straight and narrow exist as always, and certainly many adhere to them. However, it is human nature for the lines to get crossed, maybe accidentally or by way or error, as complacency becomes endemic and as all around become dependent on the outcome, thus disincentivising doing anything about it for the greater good.

I still buy at auction but have no problem in being known as the man that said 'told you so' at a date in the future. Im not sure where it will come from, but I guarantee that the time will come.

Rant over.

Alex
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Old Jan 7, 2009, 08:32 PM   #11
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Alex,

Believe me when I say I'm incredibly frustrated and angry about the massive fraud in the various markets, but the coin industry isn't open to the same kinds of fraud that an oversight committee could thwart. Even if you always win an auction at your max bid, you still can't be forced to pay more than that. "Super normal" profits are only possible if a firm has bought an undervalued coin and can find at least two people to bid it up. If someone buys a coin and wants to get "super normal" profits through their store or mail list, well, they either have bought the coin very well or are doing a disservice to their client. And that does happen too. If you can think of a way where the coin industry could spin out of control, please share so we can talk about it. I can't think of a way off the top of my head unless we dealers all banded together as a cartel to unanimously jack up all of the prices for everything available. Just the VCoins dealers alone wouldn't even be able to pull that off - we are all independent of each other for the most part.

Obviously it would be very suspicious if you always win at your max bid and I would ask for some proof. But, some auction houses don't actually lower bids. You need to understand the terms for each auction. I got in the habit of reading all of the terms since the buyer's fee varies for each one and some are REALLY high!

Now, if you want to talk about the coin industry with respect to television programs hyping up whatever and fleecing non-collectors for extreme profits, I'm all over that one with you!

--Beast
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Old Jan 7, 2009, 08:41 PM   #12
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Hi Zach

I have no problem with fixed price lists - you can buy or not buy, up to you.

Auctions give me the creeps. Nuff said! I still buy though.

Brgds

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Old Jan 7, 2009, 08:56 PM   #13
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Alex,

Across all of calendar 2007, I placed over $2,000,000 in bids at auctions. I won a total of one lot for $4,000 (which was grossly misrepresented, but I learned a lesson). I placed almost no bids in 2008 as I figured what was the point? It takes many hours of work to go through an auction catalog and match up lots with what customers want and are willing to pay, anticipating what the dollar will trade at against the auction house currency and determining an overall budget. I've determined that if I don't know someone going to the auction or going myself, I just can't bid.

--Beast
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Old Jan 8, 2009, 08:34 PM   #14
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Hey Beast,
You must be really unlucky mate.
I generally work on an average of about 20-40% success rate, depending on the
quality of the material, the location of the auction, and the strength of my bids.
Looking back over the past 20 years of bidding, I think you would see some auctions
where I get nothing, or next to it, and several where I got almost everything I bid on
(the latter is far scarier than the former, I can tell you that!).
A piece of advice for all - READ the terms and conditions! Also, experience with the
various auction houses will help you to learn what strategy to take for which auction.
Ultimately, there has been nothing revealed here in these above posts that would
surprise anyone who has been to a few auction AND read the terms and conditions
applicable to the various auction houses.
In fact, I am actually a little surprised at some of the above reactions.

Walter Holt
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Old Jan 8, 2009, 08:45 PM   #15
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Hey Beast,
Ultimately, there has been nothing revealed here in these above posts that would
surprise anyone who has been to a few auction AND read the terms and conditions
applicable to the various auction houses.
In fact, I am actually a little surprised at some of the above reactions.

Walter Holt
Old Money @ VCoins
Hi Walter

Surprises are not nice, and that's my point.

For auctions I simply think its too complicated, not transparent enough. I also think the auctions players are potentially too close knit. I wonder do the leading houses/individuals have any mutual history? These are things I am paid to worry about in my real job, can't help but extrapolate to auctions. The title of this thread allows my musings. People on this site are adult enough to draw their own conclusions of course, I might even be seen as eccentric.

Brgds

Alex
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