Auction Guide for First Time Bidders

When you are going to an auction for the first time, there are specific things that you should know :

1. Obtain an auction brochure or catalogue. Do this at least a day before the auction date. This ensures that the goods for sale are what you need.
2. From the auction catalogue, identify what you want. If it's a car, do your research on its current market value online. Once you know its value on the market, you can set your budget.
3. At the day of the sale, phone in the auction house and confirm if the auction is going as scheduled as certain auctions can be subjected to last minute cancellations or rescheduling. Phoning in to confirm if the property or an item you are interested in is still on sale is something you should do before going to the auction house as well.
4. Once you arrive at the auction house, register to obtain a bidding number. You will be asked for your name, address, and contact number and will be asked to pay a deposit or pay a certain amount for the registration fee.
5. Come early. This allows you to inspect the auction goods properly before the bidding starts. An auction brochure may be helpful in providing information of the goods for sale; but physically inspecting the items before the sale allows you to determine if the goods are really worth any amount of your money. Do an ocular inspection, days before the scheduled auction if it is a piece of property.
6. Each item is designated with a lot number for easy reference. Take note of these numbers when you are inspecting the goods. The same number will be called during the actual auction.
7. Before the auction starts, the auctioneer will explain the rules. Listen attentively and keep your ears open for additional information on the goods up for bid.
8. Once the auctioneer calls for the starting bid, the bidding process begins. Each item may be sold within seconds. Once the lot number you are interested in is called, be alert and stay focus. Do not bid an amount you cannot afford. Stay within your set budget. Most first time bidders get carried away and bid higher than what they have originally planned.
9. If you have won an item, you will be asked to pay in partial or in full and to give your personal details the day of the auction.
   

Once it is all settled, you will be asked to sign an auction memorandum. The deal is done!.....

Types of Auctions

English Auction : This type of auction is used at English auction houses like Phillips, Sotheby's, and Christie's. The process starts when the auctioneer announces the item and the minimum bid. Individuals openly try to outbid each other wherein each bid is higher than the previous one. The item is sold when the 'buy-out' price is reached or when there is no other person willing to place a higher bid. The 'buy-out' price is a pre-determined amount that is set by the seller.

In other cases, 'absentee bidding' is accepted wherein an individual will cast his or her bid online or through a telephone.

In an English auction, a 'reserve' price may be set. This is the lowest amount at which the seller is willing to sell the item. This gives the seller the right to refuse the sale if the final bid does not reach the reserve price.

One variant of the English auction is the silent auction wherein people can write down their bids together with their name on a piece of paper. At the end of the auction, the bids will be calculated and the highest bidder wins the item.

Dutch Auction : This is a type of auction where the auctioneer begins by announcing the highest asking price. The amount is then lowered until someone is willing to buy the item. The bidder pays for the last announced price. This type of auction is convenient if the seller wants to sell the goods quickly since the process requires just a single bid to get a sale.

Chinese Auction : This is basically an auction and a raffle combined. At Chinese auction, the bidders are not the ones who will call the price. Instead, the bidders will buy a ticker or tickets and place them inside the "hat" from which the winners will be drawn for a specific item. The bidders can buy as much tickets as they want to increase their chances of winning. It is unclear whether or not this type of auction originates in China but for sure, the term is more likely to come from "chance auction".

Sealed auction : This is a form of auction where participants place their bids in a concealed way, usually in an envelope. The highest bidder wins and pays the amount of his bid to the seller. A similar version, called the second-price sealed auction is a type of auction where the highest bidder wins but pays the price of the second highest bid.

All-pay Auction : This is a type of auction where all the bidders must pay for the amount they bid regardless of whether they win or not. The highest bidder wins the item.

The Problem with Auctions

Why do some bidders stick with their bids even if they are starting to go beyond the rationality of the sale? Why are there so many people who jump into the hype of auctions without really knowing why they do it? And why are there so many bidders who tend to get themselves caught in bidding wars while knowing that they will have to pay more than they can afford?

Bidding frenzy is a common problem in joining auctions which also makes some people reluctant in buying from such. Why is this happening and why are there some people who just can't stop even when the rationality of auctioning is crossed?

Here are three reasons behind this:

One, it may be due to the combination of arousal, excitement, competition, an overwhelming desire to win and extreme reluctance to back out.

Bidding frenzy is comparable with addiction to gambling in terms of the adrenaline rush and the continued excitement running in the psyche of the people involved. The more intense the bidding war becomes, the more interested the bidders become.

The rush of emotions can't be discounted when trying to understand why people participate in bidding wars. At this point, it really no longer matters whether logic is working or not, what is more important is that the person is satisfied emotionally. Also, people loose their best judgment when their minds are clouded with emotions.

Two, it may not be purely on winning the item but on testing the personal threshold of the bidder and the competitor. People who aren't so interested in the item but get caught in the bidding war no longer feel the need to get the merchandise but the need to make the other person pay dearly when the ending price is several times over than the original price.

Three, it may be due to the lack of experience with auctions. Bidding wars are more commonly observed among people who are just beginning and are not backed by sufficient information on how exactly they work. It must be noted that some bidding wars are intentionally encouraged by the auction organizers themselves.

This is working on the principle that the more interest the public has on the merchandise, the higher the value it receives and the more interested buyers bid on it. This does not only increase the hype over the item but also adds to its market value.

How Does Auction Work

Auction is not like buying something from the department store - you get it, grab the item, go to the cashier and pay for it then get out of the store with the item at hand. In auctions, there is fierce competition especially during bidding wars. There are only few items being auctioned which means that only a few people can win the bid so in most cases, even if the bidder comes well-prepared for the battle, he could still get out of the auction site with nothing in hand.

So how does auction work?

Registration
It is a must for auctioneers to have their potential bidders register before they participate in the bidding. The bidder has to give the correct information as this may be use as reference for future transactions. Typical information required are personal information such as name, address and bidding history if applicable.

Also during registration, the participant will be asked to pay a returnable deposit. Some auctioneers require large deposits, thus anyone who wants to participate in an auction should be well-equipped with knowledge on the particular type of auction.

Afterwards, the bidder will be given a bidding number which is often used to substitute for the name of the bidder as the bidding happens.

Bidding proper
Each bidder should be given a catalogue which is a list that contains details regarding the items being auctioned. (NOTE: Under normal circumstances, viewing time is allowed which could last anywhere from a few hours to several days. This allows the potential buyer to view the items he wants to bid on before the auction begins.

For some auctions that provide catalogues though, viewing is not allowed. To be sure, it is best to confirm details regarding viewing time and catalogues before the date of the auction.)

After this, the auctioneer will announce the item being auctioned and some important details regarding the item which is usually tied with the information given on the catalog. The auctioneer will then suggest a starting bid- this is not necessarily the lowest available price for the item. In most cases, the first bid usually begins at a price below the starting bid.

On the other hand, if the item has a set reserve price, the bidding will usually start above this price until it reaches the reserve price. For guiding the bidders, the catalogues usually have guide prices.

After the announcement of the starting price, the bidders are free to outbid each other until the highest bid is reached. Bidders typically get the attention of the auctioneer by raising their hands or their bidding numbers. But clear gestures can also be used.

The auctioneer will normally return to the most active bidders for confirmation of bids. If the bidder wishes to withdraw from the bidding, he can shake his head. The one with the highest bid will win the item.

After the bidding, the final bidder will pay a deposit according to the terms and conditions of the purchase. Payment methods are normally stated in the auction catalogue.