The Price May Be Right, but Know Risks at Auctions
Perhaps it is the revenge of the little people.
During the 1980s, a number of less ethical folk were getting rich and buying incredible luxuries with their loot. Today many of these same individuals are poor and imprisoned, and their luxury houses, cars, boats, furs and Rolex watches are being sold at public auctions.
Many real estate developers are also suffering with huge inventories of unsold homes. Some of these homes are being auctioned off too, often at prices far below the original asking prices.
It is no secret that consumers can pick up some terrific bargains at public auctions. Some maintain that luxury cars have been sold for $100 at police sales where the authorities are auctioning off goods seized from drug dealers and other criminals. Meanwhile, houses have been snapped up for half of the developer’s cost at auctions spurred by the real estate slump, auction experts say.
But buying goods at auction carries risks, and, if you are considering such a purchase, there are problems you should be aware of.
The risks vary with the type of auction and the auctioneer conducting it, but, generally, they boil down to three things: At auction you buy merchandise “as is.” In other words, if legs fall off your antique desk two weeks after purchase, you generally don’t have the ability to return it. Goods are also usually sold “where is.” You have to find a way of getting that grand piano home. There’s no delivery.
And finally, you will often have to present a cashier’s check at the door, particularly at high-ticket auctions where they are selling art, antiques or real estate. That money is at risk if you are the winning bidder for an item and later decide you don’t want it. In some cases, particularly with real estate auctions, the auctioneers require checks in the range of $5,000 to $10,000 or more. That’s a lot to lose.
What if you want the item, but realize too late that you don’t have enough money or the available financing to pay? Sometimes auctioneers will arrange financing, but if you fail to qualify, you generally will lose your deposit.
There is another problem that can particularly harm unsophisticated participants: paying too much. A good auction is usually exciting and fast-paced, and unseasoned consumers can get caught up in the moment and continue to bid for goods long after the price exceeds retail.
(Auctioneers maintain that consumers never get bargains and never get gouged at auction, because an auction is “the most efficient price-setting mechanism in the world. The final bid is the fair price,” said one industry spokesman. But the fact remains that sometimes you find you could resell the item for more or less afterward.)
Still, it is relatively simple to avoid the problems if you do a little work in advance.
Generally, auctioneers will compile brochures or information packets for large auctions. If you see an auction listed in the newspaper and want more information about what’s being sold, call. The company will usually offer to send more information or invite you to “prescreen” the merchandise.
The more you know about the goods, the less likely you are to run into problems with the “as is, where is” provisions.
The brochure or prescreening will give you a glimpse of most things that interest you. Before the auction, you can then check out the classified section of your newspaper or retail stores to see what these items are being sold for elsewhere. Then figure out what your top price is, and don’t exceed it--at least not by much--at the auction.
(Keep this information to yourself. Some say professional buyers wander around before auctions start to find out all they can about what others will be bidding on and how much they’ll pay.
Finally, if you expect to bid for big-ticket items, such as residential or commercial real estate, line up the financing in advance. This will significantly lower your chances of losing your deposit without getting the goods.
How can you find auctions? If you are looking for a particular type of sale, check the Yellow Pages for auctioneers that specialize. If you can’t find what you are looking for, check with the National Auctioneer’s Assn. in Overland Park, Kan. (916 541-8084).
If you don’t have a particular item in mind, you can just scan your local daily newspaper. You’ll find that most major metropolitan dailies will have several auctions advertised nearly every weekend.
Going Once, Going Twice The spoils of the greedy ‘80s are for sale at auctions in the subdued ‘90s. Here’s how to make sure you don’t invest your money foolishly when the bidding gets heated:
If you see an auction listed in the newspaper and want more information about what’s being sold, call. The company will usually offer to send a brochure or allow you to “prescreen” the merchandise.
In the time preceding the auction, check out the classified section of your newspaper or retail stores to see what these items are being sold for elsewhere. Figure out what your top price is, and don’t exceed it.
If you expect to bid for big-ticket items, such as residential or commercial real estate, make sure you line up the financing in advance. This will significantly lower your chances of losing your deposit without getting the goods.
If you are looking for a particular type of sale, check the Yellow Pages for auctioneers that specialize. If you can’t find what you are looking for, check with the National Auctioneer’s Assn., in Overland Park, Kan. (916) 541-8084.