Buying and Selling at Auction – Business of Doing Business – The Journal of Antiques and Collectibles – April 2005
By Ed Welch
In the 70s and 80s, I taught a course, The Business of Doing Business in Antiques. I wrote a book for student use. Recently, I came across a copy of the book while cleaning a cluttered nook in my office. Even though the course and the book predate computers and the Internet, all the business concepts are still relevant.
This is the last of four chapters gleamed from that book. I purposely changed each chapter as little as possible, and only for clarity. I call this series of articles, Old Wine in New Bottles.
The antique auction service, as a whole, is divided into ten levels. Each of these ten levels sells a given price range of antiques or collectibles.
Individual auction services tend to operate in two or three of the ten levels. Low level auction services that cater to levels one, two, and three can have a successful level five auction, but it is nearly impossible for a low level auction service to conduct a level seven or eight auction.
There is much overlapping of levels in the auction trade. Auction company A, for example, could serve levels three, four, and five. Auction Company B could specialize in levels four, five, and six. While yet another auction service caters to levels two, three, and four. This overlapping of the levels served is part of the nature of the auction trade, and it is understood by the auction service and buyers who regularly attend the sales of a given auction company.
Understanding the levels of the auction trade that a particular auction house is trying to serve is important to sellers who dispose of their possessions through auctions.
Matching the levels of auction service with the price levels of the items sold results in the greatest return to the seller. In a high level auction, (levels eight through ten) an item worth a thousand dollars is just another sale. This item in a low level auction would be one of the most prominent, and most advertised, items at that event. Usually it is more advantageous for the seller to place an item in an auction where that item will shine and be noticed.
I once attended a rural country auction that advertised one of the best country cupboards that I have ever seen. I judged the cupboard to be worth at least nine thousand dollars, but at this mid level auction (level five), I hoped that it would fetch the seller no more than six thousand. As the auction crowd gathered, I assessed my competition. I knew that several buyers would bid, but only two would be serious competition.
When the cupboard was put up for sale, the opening bid was three thousand, I bid four thousand, three other bidders added five, six, and seven thousand. The cupboard sold for fourteen thousand dollars. The whole process took less than one minute. The buyer was a dealer that I had ruled out as not being a serious contender. The seller of this cupboard had wisely refused offers of between three and five thousand dollars and had saved the cupboard for nearly a year waiting for the proper auction to come along.
Chances are that this cupboard, if placed in a lower or higher level auction, would have sold for less money. In a higher-level auction, (seven or eight) it would have been just another item. In a lower-level auction (two or three), the mentality of the sale is such that buyers tend to be frugal and many items sell for less than their value.
Many dealers attend auctions regularly as buyers without trying to analyze each auction. They simply know their own price guidelines and bid within these limits. This is fine for buying, but when it becomes time for them to sell at auction, they tend to judge how well they will sell based on how well they buy.
Since buying and selling are very different processes, and what is good for a buyer is not necessarily good for the seller, choosing auctions to sell from, or to buy from, demand two separate paths of consideration. For most dealers and collectors it makes more sense to buy from one or more levels, and sell through yet other levels, therefore taking full advantage of all the levels that the auction trade, as a whole, has to offer.
Let us pretend for the purposes of this chapter that you inherit a complete estate, or you as a dealer purchase a complete estate. Your newly acquired property would consist of a few fine antiques, perhaps a valuable painting or two, several very old, but not quite yet antique items of furniture, knick-knacks, collectibles, household tools, some old tools, crocks, old clothing, antique clothing, maybe a good oriental rug, jewelry, silver, a modern washer, dryer, refrigerator, a used television, a good set of half worn out tires in the garage, and so on and so forth.
The difference in money from simply selling the contents of this estate, and managing the sale of the items in the estate, can be many thousands of dollars.
How often have you stayed to the end of an estate sale and witnessed entire truckloads of stuff being sold in lots. At one such estate sale I personally purchased the contents of a two car size chicken-coop that was crammed full of old farm tools. I paid three hundred dollars for this so called “lot.” I recouped my investment and made a profit of nearly a thousand dollars (selling to bottom feeders) during the process of transferring the contents from the chicken-coop to a rental truck. Three treasures hidden in this “lot” that were sold later included a boxed set of violin makers planes, a collection of hand wrought ox-bow pins, and a set of four brass mounted bit bases signed by an early German immigrant to that area. Had the heirs been willing to sort through all the rubble, instead of simply hiring an auction service to get rid of all the junk, they could have split several thousand dollars of extra sales just from the contents of the chicken-coop. Several other large “lots” were also disposed of at this sale. In fairness to the auction company, I must say that they were instructed by the heirs to “get rid of all this junk and don’t spend any money doing it.”
In selling an estate, or anything else, the more work and effort on the part of the seller, the greater the profit will be.
Although some auction houses will disagree with the advice I am about to give, others will confirm that the marketing principles here stated are advantages to the seller.
Whenever personal belongings, antiques, and collectibles are sold through auction, these items should be separated into three to five lots based on the average value of each item. Items that will sell for $20 or less should be sold by an auction service that specializes in disposing of merchandise priced at this level. Lots at this price level can often be disposed of by the owners themselves at yard sales or at local flea markets.
Collectibles and inexpensive antiques that will sell for $20-$300 should be sold by an auction service that operates at levels two, three, and four. The next category is for items that will bring $300-$1,500. These items belong at an auction house that specializes in levels four, five, and six. Items that are worth, hundreds to several thousands of dollars each should be lotted together by types and sold at specialty sales in levels five and up. Tools should go to a tool auction, toys to a toy auction, glassware to a glassware auction, etc.
Selling everything at a one-day estate sale is a fast and easy means for the heirs of an estate to dispose of a house and barn full of unwanted stuff. However, the very same items, if separated into lots and each lot assigned to its proper level, will return to the seller considerably more money.
It may be advantageous for the heirs of an estate to forego some of the profit of a managed liquidation in favor of a quick sale and a one-lump-sum payment. Dealers, on the other hand, if they are indeed dealers, must take every opportunity to maximize the return of their investments by knowing how to use the services of the entire auction trade.
Because auctions are conducted in public, it is easy to gather information on the performance of each of the auction houses that serve your area. A seller categorizing auction houses needs to gather three bits of information on every auction he or she is analyzing.
The three bits of information are:
- The average selling price of the items sold.
- The number of buyers attending.
- The actual cost of the advertising done for that sale.
You can gather information on ad cost by clipping all ads from local newspapers and trade journals and asking these publications for a rate schedule. The number of bidders at any auction is easy to learn, by asking the registration clerks or by looking for the highest bidders number.
Finding the average price requires that you, or a partner, or spouse keep track of all sales. After eliminating flukes (excessively high or low sales that happen at all auctions) simply divide the number of sales by the total of the money spent.
This information should be stored in a computer and used to find answers to questions such as: How does the dollar amount spent advertising influence the number of bidders attending? How does advertising or the lack of advertising affect the average price received? What is the correlation between the average price and the number of bidders? Do more bidders necessarily mean a higher average price for the items sold? How does a particular auction house advertise for each of the different levels of auctions that they do? Does a particular auction house do better with a certain type of item than do other auction houses covering the same area?
It is also a good idea to keep track of the time of the auction, the date, the weather, and driving conditions. Also, categorize auctions by type, such as Victorian, country, Americana, paintings, glass, toys, decoys, or tools.
Tracking the performance of the auction service that you intend to use can be as simple or as involved as you want it to be. Once you begin, the task becomes second nature. Soon, you can customize your records to include only the things that are important to you.
The better auction houses track their own sales performances. They use the information gathered to improve their service and to make public the positive and self-serving facts that they uncover. How often have you seen auction promotional advertising that states, “We hold the world record for selling item ‘A’ and other similar types of antiques.” What these auction houses do not tell you, for obvious reasons, is how well they do on the everyday types of antiques and collectibles, and these are the types of merchandise that most dealers buy and sell.
It is irrelevant that a given auction service can get millions of dollars for a painting by a well-known artist or thousands of dollars for a rare piece of Chippendale furniture. Most dealers will never handle glamorous antiques and those who do will own very few such items in a lifetime. What dealers need to know and must learn for themselves is how well a particular auction house does selling a country cupboard, an Empire sofa, a cottage pine bedroom set, Depression glass, and the other types of collectibles and antiques normally carried by today’s dealers.