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22 Feb 2014

Buying at the Auction

Author: robbleece | Filed under: Uncategorized

When you are looking for your next big find at your local Calgary auction house, follow these tips to keep from getting burned.

A little bit of research before ever setting foot in the auction mart is a must. You should have a good idea of what it is you are looking for, average costs for the item and potential problems that you should keep your eye out for.

If you are looking for a new vehicle, check your local paper for some prices. Pay attention to how many kilometres are on the vehicles, and how it is affecting the price. Remember that these ads are mostly for vehicles that haven’t sold. Just because a truck is $15,000 in the paper, doesn’t mean it’s worth $15,000. Some auction companies will have a copy of the Canadian Black book available for sale. Their are two books available, one for automobile wholesalers and one for the public. The Wholesale book is values from what similar vehicles have sold for at auction and the public book is a blend of wholesale and retail pricing.

Also take into account that when buying a used vehicle, especially from an auction, that their may be minor issues or repairs needed to the vehicle. Some of the easy things to spot are visible in the tires. Does it look like it has lots of tread left? Is the treadwear even all accross the tire? When you start it up is their smoke coming out of the exhaust? Does the motor run smoothly or does it have a shake in it. While these things are not a definitive diagnosis they will lead you into either staying away from a vehicle, or having a professional take a look at the vehicle before you buy it.

Most auction companies get their inventory from consignors. Sellers bring in product for the auction company to sell, the auction will then take a percentage of the sale as a commission. The auction company doesn’t always know if a product is in need of repair or not. It is up to the buyer to inspect an item before placing a bid on it. I have been to auction sales where most of the items were tested and the auction company had written any deficiencies right in the catalog description. This is a best practice as it allows buyers to bid with confidence that the item they are buying is in working condition.

With respect to Real Estate auctions, the properties are usually opened up for 4-5 hours a day, for a few days prior to an auction sale. This time is reserved for bidders to inspect the property and have a home inspector come through and verify the condition of the property. The inspection period also gives buyers a chance to find out all of the details that they may need in order to arrange financing on the property. When it comes time for the auction sale, all buyers have had an equal opportunity to inspect the property and are on a level playing field when it comes time to buy.

Some general merchandise auctions will usually have a viewing period ethier the full day before the auction and/or the morning prior the auction sale. This is the time when buyers can look through all of the boxes of miscellaneous items to find the hidden treasures. As most of the products are used, it is the perfect time to have a look through all of the items you are interested in and to check for any damage.

So, you have now inspected the item and have decided it’s something that you must have in your possession… Here’s some tips on how to bid and setting your limit. Here is where all of the research you did is going to pay off, you’ll know exactly what your item is worth on the retail market and you’ll be able to figure out what you are willing to pay at the auction. Typically I set my limit at 70% of a retail price, often I will be able to buy items at less than that and sometimes because a hot item is not available in stores I have paid more than a retail price. (remember that whole Tickle me Elmo thing.) Most people will tell you to set a limit and stick to it… I disagree, I use the limit+1 rule. Often, you will be against another bidder that has the exact same limits as you and if you both stop at your limits, you will only be able to purchase half of the items you intended on. The benifit of plus one is when you are against another bidder with the same limits as you, you will be achieving all of your buying goals while they are going home empty handed.
If an item has a retail value of $100 and the auctioneer is going up in $5 dollar increments, My limit will be $70 for the item. If my competition also has a limit of $70, I may have to bid $75 to get the item. Sure, I spent more money than I wanted to, but I still bought the item for 75% of it’s retail cost and I get to take the item home. My same limit competitor has left the sale with nothing but a wasted day.

People often ask me how they should bid at an auction. While professional auction buyers use different psychological tactics for bidding, here are some of the most common traits found in most techniques.
-Start the bidding high. If you wait for the auctioneer to get down to the bottom, you will invite more competition. If the bidding starts too low, everyone will be bidding and the final sale price is usually high.
-Be agressive with your bidding. If you are fast with your bid it applies all of the pressure to your competition, most buyers feel pressured and have two options to remove the pressure; Bid or not Bid. If they bid and the pressure is automatically re-applied to them, they usually resort to the option of not bid.
-Don’t cut the bid. Some people think this is a way to get an item for less money. It is really showing your competition that you are weak. The only time that you should cut the bid is if you are actually at your maximum limit.
-Have fun. This is the most important part of the auction. Many people will attend an auction as a social gathering. While it is a very intense, competitive and actioned packed business, the people are very friendly and there is always someone willing to help a newcomer.

 

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