Auctions—What is REALLY going on there

    I have been a dealer in rare coins, antiques, etc., for well over 50 years. During that time, I have attended hundreds, if not thousands, of auctions all over the world.

    These range from small country auctions to the largest sales held in Europe, Hong Kong and many other places full of glitz and glamour. Christie’s & RM Sotheby’s are probably the leaders in this field where the auctioneers are in tuxedos and the bidders are quite a sight to see as well.

    The GTO at $50 million was very impressive but it pales in comparison to the DaVinci painting and other items that brought multiples of what the GTO brought.

    What prompted me to write this article is how the car magazines say “High bid was” or something like “At the last bid, there should have been a deal to be done”.

    These statements are highly misleading to people not familiar with how these auctions work.

    One must read the fine print on the terms and listen very carefully  to the auctioneer who states, as fast as possible, “We call your attention to term X of the sale which states --- the auctioneer may open bidding on behalf of the seller up to the amount of the reserve by placing several consecutive bids or bids in response to other bidders”.

    I watched an RM Sotheby’s sale as I write this and I could barely make out what the auctioneer was saying, but I knew all too well.

    Think about the above for a second and let’s analyze it. The auctioneer can open a bid on behalf of the seller (the owner of the car) up to the amount of the reserve (minimum that the car will sell for) by placing bids—several  consecutive bids.

    Hold it. This means that the auctioneer can say, according to the terms of the sale:

    On Lot 35, we have $600,000, 650, 700, 750 now, then 800, 850 with NO ONE AT ALL BIDDING on the car.

    Didn’t he say by placing several consecutive bids?  So the car went from $600,000 up to $850,000 without anyone bidding at all.

    Now the second thing: by placing bids in response to other bidders. I was bidding on an early Ferrari in Pebble Beach several years back. It opened at $500,000, and I started to bid.  Here is what I saw.

    Opening at 500, now 550. I bid 600.

    Auctioneer accepted my 600—then said 650 in front of you – now 700. So, I bid 750—then the auctioneer said 800. I bid 850, auctioneer went 900.  I did not want to go over $1 million.

    Seeing no one else bid, the auctioneer said to me 925? I said no and then he proceeded to go to 950, 1 million, 1.1 million.

    He then said—not your bid, to whom I do not know.

    Seeing no other bidders, he finally said that we will pass the lot at 1.1 million.

    If we read the car magazines, we will see “High bid of 1.1 unsold.” But that is simply not true and highly misleading.

    There was no real bid over 850 so the rest was just window dressing. The seller did not want to take less than 1.1 or so.

    Based on that, the auctioneer ran it up to the 1.1 so the people there would not see the car stop at my last bid.

 

    One might ask “How does Goldman know that?”   Well if you have been to as many auctions as I have, one thing you should look for is what the auctioneer is saying.

    If he is simply calling numbers with no placement of where the bid is coming from, you can be pretty certain that he has nothing.

    If he says bidder in the front, or with Tony on the telephone, this USUALLY means that there is someone bidding. But not always.

    I have been to several major car auctions where I have seen someone from the staff bidding on the phone—but there is no one there.

    Again, how do I know this. Watch the phone bidder. If he is not displaying a bidder card, or has it turned backwards, you should be fairly sure that he is just running up the bid.

    Another rule here in the USA is that if something is unsold, the auctioneer is required to state something like “Pass”, “Bought in”, “Unsold”, etc.

    This is a rule in the USA but many times I have seen it not done. When you look at the prices realized from the auction and the lot is not listed, then it was unsold.

    In Europe, where this rule is not law, they just say, next lot with no comment at all.

    When you see the articles in the magazine saying “High bid of XXX should have been enough to do a deal” or that the seller should have accepted the last bid, take this with a grain of salt.

    There is a good chance that the chandelier was doing the bidding. And with all the sales I have been to, I never saw the chandelier take delivery or write a check!

    Ken Goldman, President of Kenneth Goldman, Inc., has been involved in collectibles for well over 60 years.  Mr. Goldman has been a buyer, seller and cataloger with Christie’s, Sotheby’s,  Bonhams and many other auction houses throughout the world.  He can be reached at KenGoldman@aol.com.