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  • Writer's pictureMike Brandly, Auctioneer

Reserve auction needs reserves?

The argument for with reserve auctions goes like this:

  1. The high bids on lots were below market value, and as such, the reserve auction with sufficient marketing benefited the auctioneer by being able to “no sale” items; or, since the auction was with reserve, the auctioneer could bid for the seller to protect from want of bids.

The counterargument (without reserve) for many other auctioneers goes like this:

  1. Lots sold without reserve coupled with sufficient marketing result in market values and as such no reserves nor seller bidding would be necessary as the bidder pool is sufficient.

Do auctioneers who regularly conduct with reserve auctions see the need to keep doing so? Do auctioneers who sell without reserve see the benefit of continuing to do so? It seems so.

With reserve auctions attract fewer bidders — so being able to “no sale” or bid for the seller is often necessary. Without reserve auctions attract more bidders — so not being able to “no sale” lots or bid for the seller (outside of forced sales) is a non-issue.

As we wrote before, many auctioneers who are fanatical about with reserve auctions appear to be anomalists. They always think something bad is going to happen:

Could a fan of with reserve auctions actually conduct a highly successful auction? Of course, by publishing the minimum the seller is willing to accept, and ensuring that minimum — when compared to market value — is substantially less, thus portraying a “prospect of a deal.”

Yes, auctions work when there’s a prospect of a deal, and generally don’t work when there is no such prospect. Secret reserves, seller bidding, high minimum bids, and less disclosure depress interest and as such, bidders.

Fewer bidders = less bidding = lower prices. More bidders = more bidding = higher prices. It would seem obvious, but sometimes not to those holding with reserve auctions who never see these larger bidder pools.

When you as an auctioneer hear that a with reserve auction was a good decision because protections were in place — believe it. When you as an auctioneer hear that a without reserve auction was a good decision because more bidders showed up so these same protections weren’t needed — believe it.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at Mike Brandly, Auctioneer, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.

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