Online Auctions - "The Fine Print"

[jason]

After adding the ability to have auctions directly on Steer Planet and talking with quite a few people about what they like and don't like, one item has stood out to me.

The majority of auctions that you see posted on other sites appear to be no reserve, but under closer examination there is a reserve, you just need to look in the fine print.  Your are effectively bidding against the seller until the reserve is met, not the actual seller, but the auction company representing the seller.  However, the lot having a reserve is not disclosed, nor when the lot actually meets the reserve and from my knowledge the house bidding #s are not made available.

My first thought was this is got to be illegal and it would be characterized as bid shilling.  However after a bit of research as long as it is fully disclosed in the auction terms, this type of practice can take place depending on the state.


From http://auctionlaw.wordpress.com/

"There are basically two ways to “protect the reserve”. One method method is to “Pass” the item, if it does not meet the reserve. The other is “bidding on behalf of the reserve” and may only be done if DISCLOSED to the bidders (note the emphasis). Some auctioneers may also use a consignor bidder number or “house number”, in such cases that the reserve is not met, to keep things flowing smoother and allows for tracking during settlement of the auction.

The key point is “DISCLOSURE”. If the auctioneer has not disclosed that such bidding may be allowed, then it would be considered “shilling” and would be considered fraudulent bidding."

 

[jason]

The way I have done reserve auctions is basically like an ebay auction that had a reserve.

Seller chooses a reserve
Lot displays "reserve not met"
Bidders bid on items until reserve is met
Lot displays reserve met

It is setup so that the system will bid against to you to get to the reserve.

If Lot 1 starts at $100 and the reserve is $1000.
A bid of $500 will bypass proxy bidding and go to $500
A bid of $1200 will hit the reserve of $1000 and stop, until someone outbids your $1200.



The other ways to have a reserve, is just have a higher minimum bid.


What are your thoughts on this?

 

[qbcattle]

Definitely interesting, although you would think the most straight shot way of going about it would be to set your minimum at ur real minimum.

However I do believe in the ability to p.o. Your cattle. Auction style selling takes the control completely away from the seller. And until bids are closed I feel the seller has the rt to buy his animal back if it does not bring what he/she feels it is worth.

I do understand that some would feel like they were just being "ran up" and that could easily leave a bad taste in their mouth, however u r still bidding against another individual willing to have ownership of the animal at that price.

Definitely most bullet proof way is starting at ur minimum but I guess that's just not how most auctions r ran. I guess for psychological reasons. My grandfather starts the cattle at our sale barn and he was always started them fairly low and let the bidders make the market. Many ways to do it, no matter how its done it is never going to please everyone. But honesty should always be number one in business dealings to me.

Interesting subject

 

[DLD]

Definitely interesting, although you would think the most straight shot way of going about it would be to set your minimum at ur real minimum.

However I do believe in the ability to p.o. Your cattle. Auction style selling takes the control completely away from the seller. And until bids are closed I feel the seller has the rt to buy his animal back if it does not bring what he/she feels it is worth.

I do understand that some would feel like they were just being "ran up" and that could easily leave a bad taste in their mouth, however u r still bidding against another individual willing to have ownership of the animal at that price.

Definitely most bullet proof way is starting at ur minimum but I guess that's just not how most auctions r ran. I guess for psychological reasons. My grandfather starts the cattle at our sale barn and he was always started them fairly low and let the bidders make the market. Many ways to do it, no matter how its done it is never going to please everyone. But honesty should always be number one in business dealings to me.

Interesting subject

I couldn't agree more.  I've always said that no matter how you are buying cattle - private treaty, live auction, phone bid off, online, whatever... - you need to decide what that animal is worth to you, and be willing to give that and not worry about if you were being ran or by whom (exactly as qb said - they're worth that to someone else or they wouldn't be bidding, even if it is the owner) or what kind of cut somebody in the middle is getting.  Bid to whatever you think is a fair price (or to what you can afford, whichever comes first) and walk away if you don't get them bought.  If you don't trust who you're trying to buy from, you prob'ly shouldn't be buying from them anyway, 'cause even if you do get one bought you'll always be worried about how they have (or will) get to you.

Interesting stuff though, Jason.  I agree that setting the starting bid at the reserve seems the most simple, but I know lots of people like to start 'em low and try to let everybody play, at least for awhile.

 

[jason]

No reserve is a lot more exciting than a reserve auction and more bids give an expectation that a lot is hot or in demand.

Also prevents you from actually knowing what sold and what didn't sell.

 

[DLD]

Very true, Jason.

 

[jason]

I don't have a problem either with the seller have ability to buy the animal back, it just seems to me it ought to be a little more transparent. 

 

[qbcattle]

Jason do u have any suggestions on how to make it more transparent without actually starting at the minimum?

As a seller u don't want to put on a sale and have them listed at various minimums then u have trouble selling the cattle that have the lowest minimums because the prospective buyers have the notion that you do not think those cattle are any good, which probably isn't the case or they wouldn't be in the sale.

So then if u r going to start ur cattle all in the same place but need certain cattle to bring a desired minimum above where they were started, what would be the best way to do it? Obviously in a perfect world multiple buyers would be in on the calf and take him there but if not what would be the most straight shot way of doing it so that no buyer feels uncomfortable or cheated?

 

[jason]

Jason do u have any suggestions on how to make it more transparent without actually starting at the minimum?

As a seller u don't want to put on a sale and have them listed at various minimums then u have trouble selling the cattle that have the lowest minimums because the prospective buyers have the notion that you do not think those cattle are any good, which probably isn't the case or they wouldn't be in the sale.

So then if u r going to start ur cattle all in the same place but need certain cattle to bring a desired minimum above where they were started, what would be the best way to do it? Obviously in a perfect world multiple buyers would be in on the calf and take him there but if not what would be the most straight shot way of doing it so that no buyer feels uncomfortable or cheated?

What about just having reserves?  The auction will read "reserve not met", until the reserve is met.  Seller protects his lot, and buyer is fully aware of where they are at in the bidding process.

During the bidding process, if someone bids and does not hit the reserve, their bid is incremented to their max bid.  If there max bid is less than the reserve amount, it encourages them to bid again.  If there max bid was over the reserve amount, then their bid would be taking right to the reserve, reserve dropped, and any amount over the reserve would be in a form of a proxy bid that would bid against any other bidders.

I just don't see the need for the house to bid on an auction unless they want to perceive their is more action than their really is or at the end perceive that all lots were successfully sold, when maybe a few were won by the house.

I might be all wrong in my thinking, it just seems there ought to be a clear line out there.

 

[qbcattle]

I'm sorry , could u explain again where u said "their bid is incremented to their max bid" . Is this just for those that have proxy bids in place? The way I read this (and it may be wrong), is that if the lot opens up at 1000 and I bid for 1250 but have not met the reserve with that bid, and my proxy is set at 2000 then it jumps me to my proxy max??

 

[hevmando]

If I understand what Jason is saying is your bid is raised to your proxy max or the reserve, whichever is lower.  If your proxy max meets the reserve, it goes to the reserve.  If your proxy max is less than the reserve, your bid goes to your proxy max.

 

[jason]

The way I explained is confusing.  Here is a scenario.

Lot 1 -  Minimum Bid $1000, Reserve $2000 - Auction Just Opened, Bidding increments $100

Bidder A puts in a bid of $1500, because the reserve is not met, the bid bypasses the next bid increment and the bid goes to $1500.  Bidder A is informed that while they are the high bidder, the reserve is not met and won't sell to them until they increase their bid.  Bidder A increases his bid to $2500.  Since the reserve was met at $2000, the bid goes to $2000 and the rest of the bid ($500) is a proxy bid.

Bidder B decides to bid and sees the current bid is $2000.  Bidder B places a bid of $2200.  The bid increases to $2200, but Bidder A is still the high bidder, because their original proxy is at $2500.  Bidder B decides to place another bid of $3000.  The bid then jumps to $2600 and bidder B is the new high bidder (bidder A original proxy of $2500 is outbid).

 

[jason]

If I understand what Jason is saying is your bid is raised to your proxy max or the reserve, whichever is lower.  If your proxy max meets the reserve, it goes to the reserve.  If your proxy max is less than the reserve, your bid goes to your proxy max.

Correct, essentially the auction wants you to win and order to win the reserve has to be met.  Once the reserve is met, then proxy bids are in place to allow a buyer to place their max bid.

 

[rmbcows]

I think how you like an auction run depends on if you are a seller or a buyer.  I find those "reserve not met" frustrating and usually quit bidding before I normally would.  ( or do I?  lol )  I do think it's annoying, I much prefer to bid against "someone".  I don't think the phantom bidders on many online sales fool many bidders.  The same 2 or 3 numbers running up all the bids... come on now. 
You would think that just putting your bottom dollar on the auction would be the answer, but it's a lot harder to make that first bid at $2000 than it would be to think you're getting a buy at $1000.  Once you make that first bid, you've staked your claim and it's much easier to bid $2000 to protect what's "yours".  That's why it's so easy to overbid, you just keep telling yourself "just one more time", that's why as a seller, I'd want as many buyers to get to bid on my calf as possible. 

 

[jason]

I think how you like an auction run depends on if you are a seller or a buyer.  I find those "reserve not met" frustrating and usually quit bidding before I normally would.  ( or do I?  lol )  I do think it's annoying, I much prefer to bid against "someone".  I don't think the phantom bidders on many online sales fool many bidders.  The same 2 or 3 numbers running up all the bids... come on now. 
You would think that just putting your bottom dollar on the auction would be the answer, but it's a lot harder to make that first bid at $2000 than it would be to think you're getting a buy at $1000.  Once you make that first bid, you've staked your claim and it's much easier to bid $2000 to protect what's "yours".  That's why it's so easy to overbid, you just keep telling yourself "just one more time", that's why as a seller, I'd want as many buyers to get to bid on my calf as possible.

Yep and that is the reason it is done.  Entice bidders. 


Boy, no was has bid on Lot 7, let us think about it and see what happens.

Boy, Lot 7 is hot, already got a couple bids in and it just opened, we better get our bid in.

Boy, bidder 567 must have deep pockets, he has had the opening bid on every single auction this year.  (lol)

 

[ferkj]

Here's my 2 cents (which may not even be worth that).......Every auction wether online, tele, or live real in person there is a chance someone can or is running the bids.  Auctioneers do it all the time "pulling" bids to get things moving.  What i do with the online sales is decide what i want to spend on the lots I'm interested in, place the bids as max bids and then go do something else and wait for an email either winning or being outbid.  The way I look at it is if I don't get the ones I'm after I still have my money to buy some of the ones selling tomorrow. 

 

[jason]

The more people I talk to the more I get, well this has been going on for years and basically it is what it is.

Anyone else care to comment? 

 

[goodnight]

The more people I talk to the more I get, well this has been going on for years and basically it is what it is.

Anyone else care to comment?

There was an online auction I was bidding on recently. I had the high bid, and my max bid was a little ways off (bid was at 70, or so, and my max bid was 90, or so). There was a couple of hours left. I refreshed and the bid went immediately to $150. I stopped bidding. Did I bid against the rafter brothers? I will never know, but there is a very high likelihood that I won't be using that service again (never say never). If they had just had reserve not met on the bidding, then I wouldn't care. As it stands, it is enough to make me raise an eyebrow. That is enough for me to very seriously consider not doing business with them.

Just because it is the way it has always been doesn't make it right. I don't think people appreciate the veil of anonymity. Just my $.02, which won't even buy a miller lite.

 

[BTDT]

I can argue this both ways.
For every single thing I purchase, I have my limit set BEFORE I make the purchase. So if I am going to an auction, I determine how much I am going to bid before the lot sells. I rarely ever move off of that limit. So, I guess if I am bidding against the rafters, either online or in the seats, so be it. I won't spend over my pre-determined amount.
Do I like to get things cheaper than my limit? Absolutely! And if I think for one single second that something is "up", I pull my bids and walk away. There is always another cow,embryo,semen somewhere else.
I am not naive enough to think that every animal "sold" actually has money change hands, and I am not naive enough to believe that animals are not "ran" during sales. Heck, some "high sellers" are never even transferred!  It would be nice for everything to be up front and out in the open. When I sell at a public auction, I announce up front what my reserve is. I don't care where the auction starts, as long as it finishes above that amount.  If I have no reserve (which is usually the case) I am up front about that too.  If they get a bargain and make lots of money on their purchase, the buyers will be back.

As I have stated before, auctioneers, sale managers and sale representatives work for the seller, not the buyer. Do no think for one single minute they have your (buyer) best interest in mind, especially if they are working on a commission. Why else do you think sellers hire them??

In a perfect world, yes, reserves and limits would be in plain view, but we all know that is not the way it is.

 

[rmbcows]

My hats off to those of you who can set your ceiling and never deviate from it.  Guess I'm guilty of getting a little too caught up and will usually go a bid or two over my limit. lol

I would like to say that it's easy to let our imaginations run away with us when it comes to auctions.  I'm betting that most auctioneers are ethical and do NOT run bids up just to be doing it.  I have been to sales where a breeder has put a base on an animal and they will run the bid up to that base but no higher, I don't have a problem with that.  I would be more frustrated to bid on an animal only to hear "no sale" because it didn't bring enough.    It is also possible that they have phone in bids that they are bidding.