As an auctioneer, I often get calls from folks wanting to know what their items are worth. Many also think that because something is old, it must have value. Others may think that because the item originally cost a lot of money, it must also have value.
I've disappointed quite a few people with the reality of their mistaken beliefs. Others have probably thought I didn't know what I was talking about, as someone else told them it was worth something.
These treasures might range from 8-track tapes to beautiful dining room furniture or a myriad of other things that someone hopes to turn into a small fortune.
The disappointing reality is that everything is based on supply and demand. Even if there is limited supply, if there is also little demand, then there is little, if any, value.
Not too long ago, I had a relatively well-known artist call me to discuss selling a lot of his personal property at auction, as he was looking to downsize and move into a smaller home. Sitting in a large living room, was a beautiful baby grand that he had purchased for ~$16,000, less than two years ago. I knew that I was going to disappoint him when I had to tell him that it probably wasn't going to bring more than $5000 (and you thought cars depreciated fast?).
While there are a few people that still buy pianos, there really isn't a big demand for them. This is best illustrated by the fact that there are only three US manufacturers left and the largest, Steinway, only makes about 2500 pianos a year. The other two produce about a hundred per year... combined!
So what happened? Electronic Keyboards at a fraction of the cost, weight, maintenance and space requirements of their predecessor. They have almost obsoleted the industry of craftsmen that once produced a fixture found in so many homes.
So, read what's happening to a lot of those old pianos:
For More Pianos, Last Note Is Thud...
OH! You don't even want to ask about ORGANS. You'll be even more disappointed.
Friday, August 03, 2012
Tuesday, July 31, 2012
Auction Aug 25th - 7.7 Self-Sustaining Homestead in Montgomery County, TX
See our online flyer Auction 7.7 Self-Sustaining Homestead in Montgomery County, TX
OR
Visit AuctioneerTexas.com for details
Tuesday, October 26, 2010
Auction Shills, Buy Backs & Reserves
This subject has to rank right at the top, when it comes to misunderstandings and myths about auctions.
I often hear comments, which imply that auctioneers just "run up the bid". Of course, this often implies that the auctioneer is "shilling" or similar illegal activities and in some cases, it may be true. However, it also depends on one very important point, referred to as Disclosure.
So, first we must understand why the auctioneer would bid against the bidders, in the first place. This is usually due to a "reserve" or minimum price that must be met, which was set by the seller.
The Texas Business and Commerce Code, Section 2.328, was adopted and it is also designed to protect the seller, in case there isn't a reasonable interest for their goods, at a particular auction. Therefore, it states that ALL auctions are considered to be With Reserves, unless otherwise announced to be Absolute (without reserves). This gives the auctioneer the authority to protect the seller from a "bad day" at the auction.
So, if there is only one bidder with any interest and bidding starts below the reserve, the auctioneer only has two options:
1.)Pass the item, in which the bidder may get upset because they would have bid higher and the item may have met the reserve, or
2.)Bid on behalf of the seller's reserve, until the item reaches the minimum or the bidder stops bidding. Of course, if the reserve is not met, the auctioneer may sell it to a "seller's bidder number" or "Pass" the item. (I'll explain this more, shortly.)
HOWEVER, there are laws that determine IF and WHEN an auctioneer or seller can bid!
If the auctioneer does not DISCLOSE that they will bid on behalf of any items with reserves, then it is called "shilling" (capping, puffing or other similar terms), which would be illegal.
Of course, laws are written mostly by lawyers, so you often have to read carefully to understand the meaning and what it does or doesn't allow. So, as we keep this in mind, we look at another part of Section 2.328, which states, "If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved...".
You should note the words, "and notice has not been given that liberty for such bidding is reserved". This is the part that gives the auctioneer the authority to bid on behalf of the Seller, ONLY if "such bidding has been DISCLOSED" (notice has been given) by the auctioneer, prior to doing so.
So, to simplify this:
1.) This means, if it is DISCLOSED that the Seller (or the seller's agent) has the right to bid, then it is completely legal for the Seller to bid on their own items.
2.) If the auctioneer DISCLOSES that he/she reserves the right to bid on behalf of the Seller (as the seller's agent) and/or any reserved minimums, then it is also legal. In such cases, usually the auctioneer (or their staff) will bid on behalf of the reserves, as needed. This is the more common method, as it keeps Sellers from second guessing the bidders and running the bid higher than they may have originally sold it for, had they just set an agreed minimum with the auctioneer.
If the item does not meet the reserve price, then the auctioneer has two options.
1.) The auctioneer may "Pass" the item.
2.) The auctioneer may use a use a "Seller's Bidder Number" or "House Number" and "sell" the item back to the Seller. This is typically referred to as a "Buy-Back" and there are several reasons that the auctioneer may use this method. I'll explain more about this, later.
Note: The auctioneer does not have to disclose if a particular item has a reserved minimum. In fact, it is not in the Seller's best interest to disclose items with reserves or the minimum price, as it tends to stifle the bidding.
Keep in mind, "Disclosure" does not mean that the auctioneer must make the statement each time, for each item. Neither does the auctioneer have to make a verbal statement regarding such disclosure, if it is clearly stated in a written Terms & Conditions made available for everyone to read.
Buy Backs: Why do some Auctioneers use a "House Number" or "Seller's Bidder Number"?
One of the reasons is that the auctioneer may charge the seller for reserved minimums, if the item doesn't sell. This may be a flat fee or a percentage of the minimum reserved price or possibly the highest bid received, etc. In some cases, the seller may be required to actually pay for the item and then get paid for the "sale" of the item, minus the auctioneer's commission.
Sellers should keep in mind, since the auctioneer works on commission and for each item that does not sell, the auctioneer would otherwise only be losing money after expending the same effort to advertise and attempts to sell your item, as other items without reserves. So, one might consider why the auctioneer would waste their time and effort, when they may have been able to sell something else and earn a commission on that sale. Keep in mind, even a Doctor still charges you when he/she tells you that you only have a cold and you just end up going to the pharmacy to buy cough syrup off the shelf. The same is true for all Professionals, as they are paid for their time, knowledge and effort expended.
Now, some bidders still may not think it's fair for an Auctioneer to allow a reserve on the items, although the law states that ALL auctions are considered With Reserve, unless specifically stated that they are "Absolute". You rarely find any auctioneer advertising an Absolute Auction, even if everything has no reserves. This still allows the auctioneer to use their judgment and pass any item that may not have a reasonable offer, based on their responsibility to the the Seller, which is who the auctioneer is actually working for, not the bidders. This is also covered by law and is referred to as "fiduciary duty".
Should the Auctioneer just say "Pass"?
I rarely use "seller's bid numbers" or "house numbers," although I will admit that I have done so on some occasions. In some cases, if I can't get the bidding started at the reserve, I may sometimes just "Pass" the item. If I do accept a bid below the reserve, then I may bid on behalf of the reserve and if it doesn't meet the minimum, I may only "Pass" the item or... "Sorry folks, we didn't quite make it on that one. Next item!".
Now, I've also had people ask why I don't sell as much as other auctioneers do, as it appears that everything sells at other auctions and a few have also complained that I "pass" too many items. This is another reason that many other auctioneers prefer to use "seller/house numbers", as it seems to make it appear more interesting to the buyers, as they hear "sold"... after all, that's what they expect at an auction. So, I may not please everyone with my methods, either. But, I just like to be a bit more open about the way auctions are conducted and the bidders get to see what is really selling and which items were "passed". To me, it beats explaining why the item that Sold, showed up again at a later auction.
In summary, let's revisit Section 2-328 of the Texas Business and Commerce Code:
Part (4) is where it states, "if the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved..."
So, if it is "announced" either verbally or within the Terms & Conditions, then "Notice HAS been given" and it is legal.
While I do know that there are some auctioneers that do not legally comply with this law, be sure that you have read all Terms & Conditions and have also listened closely to any opening announcements, as the Disclosure does not have to be provided in both forms of communication. Therefore, some auctioneers may have the disclosure written in their Terms & Conditions, but they may not verbally announce it and leave it to the bidder's own due diligence (and perception). Keep in mind, the law makes it the bidder's responsibility to know what the term and conditions are, prior to bidding. Just because you weren't there during the opening statements, you are still legally bound to those terms when you bid... even if you don't know what was stated. So, find out, BEFORE you bid.
You can read the laws that govern auctions & auctioneers on the Texas Dept of Licensing & Regulations (TDLR) website at:
http://www.license.state.tx.us/auc/auction.htm
You can also download the "Greenbook" at the TDLR web site, which is a compilation of ALL laws that an auctioneer must be aware of, from auction laws to business requirements, trade laws, lien requirements, auto, real estate, wildlife and many, many more. You can find the "Greenbook" here: http://www.license.state.tx.us/auc/greenbook.htm (this is a PDF, so you will need the free Adobe Acrobat Reader)
Keep in mind, if you come to one of our auctions, you will often hear me state that I reserve the right to bid on behalf of any reserves and other similar statements. However, should I forget to make a particular announcement, I ALWAYS have a written Terms & Conditions posted at my auctions and I strongly encourage everyone to carefully read it, as it would take too much time to try to cover every detail when we're trying to get the auction underway. Of course, a few people may think I spend too much time on the opening statements, but I do try to make sure that everyone understands what is going on at OUR auctions.
Jim
Texas-National Auctioneers
I often hear comments, which imply that auctioneers just "run up the bid". Of course, this often implies that the auctioneer is "shilling" or similar illegal activities and in some cases, it may be true. However, it also depends on one very important point, referred to as Disclosure.
So, first we must understand why the auctioneer would bid against the bidders, in the first place. This is usually due to a "reserve" or minimum price that must be met, which was set by the seller.
The Texas Business and Commerce Code, Section 2.328, was adopted and it is also designed to protect the seller, in case there isn't a reasonable interest for their goods, at a particular auction. Therefore, it states that ALL auctions are considered to be With Reserves, unless otherwise announced to be Absolute (without reserves). This gives the auctioneer the authority to protect the seller from a "bad day" at the auction.
So, if there is only one bidder with any interest and bidding starts below the reserve, the auctioneer only has two options:
1.)Pass the item, in which the bidder may get upset because they would have bid higher and the item may have met the reserve, or
2.)Bid on behalf of the seller's reserve, until the item reaches the minimum or the bidder stops bidding. Of course, if the reserve is not met, the auctioneer may sell it to a "seller's bidder number" or "Pass" the item. (I'll explain this more, shortly.)
HOWEVER, there are laws that determine IF and WHEN an auctioneer or seller can bid!
If the auctioneer does not DISCLOSE that they will bid on behalf of any items with reserves, then it is called "shilling" (capping, puffing or other similar terms), which would be illegal.
Of course, laws are written mostly by lawyers, so you often have to read carefully to understand the meaning and what it does or doesn't allow. So, as we keep this in mind, we look at another part of Section 2.328, which states, "If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved...".
You should note the words, "and notice has not been given that liberty for such bidding is reserved". This is the part that gives the auctioneer the authority to bid on behalf of the Seller, ONLY if "such bidding has been DISCLOSED" (notice has been given) by the auctioneer, prior to doing so.
So, to simplify this:
1.) This means, if it is DISCLOSED that the Seller (or the seller's agent) has the right to bid, then it is completely legal for the Seller to bid on their own items.
2.) If the auctioneer DISCLOSES that he/she reserves the right to bid on behalf of the Seller (as the seller's agent) and/or any reserved minimums, then it is also legal. In such cases, usually the auctioneer (or their staff) will bid on behalf of the reserves, as needed. This is the more common method, as it keeps Sellers from second guessing the bidders and running the bid higher than they may have originally sold it for, had they just set an agreed minimum with the auctioneer.
If the item does not meet the reserve price, then the auctioneer has two options.
1.) The auctioneer may "Pass" the item.
2.) The auctioneer may use a use a "Seller's Bidder Number" or "House Number" and "sell" the item back to the Seller. This is typically referred to as a "Buy-Back" and there are several reasons that the auctioneer may use this method. I'll explain more about this, later.
Note: The auctioneer does not have to disclose if a particular item has a reserved minimum. In fact, it is not in the Seller's best interest to disclose items with reserves or the minimum price, as it tends to stifle the bidding.
Keep in mind, "Disclosure" does not mean that the auctioneer must make the statement each time, for each item. Neither does the auctioneer have to make a verbal statement regarding such disclosure, if it is clearly stated in a written Terms & Conditions made available for everyone to read.
Buy Backs: Why do some Auctioneers use a "House Number" or "Seller's Bidder Number"?
One of the reasons is that the auctioneer may charge the seller for reserved minimums, if the item doesn't sell. This may be a flat fee or a percentage of the minimum reserved price or possibly the highest bid received, etc. In some cases, the seller may be required to actually pay for the item and then get paid for the "sale" of the item, minus the auctioneer's commission.
Sellers should keep in mind, since the auctioneer works on commission and for each item that does not sell, the auctioneer would otherwise only be losing money after expending the same effort to advertise and attempts to sell your item, as other items without reserves. So, one might consider why the auctioneer would waste their time and effort, when they may have been able to sell something else and earn a commission on that sale. Keep in mind, even a Doctor still charges you when he/she tells you that you only have a cold and you just end up going to the pharmacy to buy cough syrup off the shelf. The same is true for all Professionals, as they are paid for their time, knowledge and effort expended.
Now, some bidders still may not think it's fair for an Auctioneer to allow a reserve on the items, although the law states that ALL auctions are considered With Reserve, unless specifically stated that they are "Absolute". You rarely find any auctioneer advertising an Absolute Auction, even if everything has no reserves. This still allows the auctioneer to use their judgment and pass any item that may not have a reasonable offer, based on their responsibility to the the Seller, which is who the auctioneer is actually working for, not the bidders. This is also covered by law and is referred to as "fiduciary duty".
Should the Auctioneer just say "Pass"?
I rarely use "seller's bid numbers" or "house numbers," although I will admit that I have done so on some occasions. In some cases, if I can't get the bidding started at the reserve, I may sometimes just "Pass" the item. If I do accept a bid below the reserve, then I may bid on behalf of the reserve and if it doesn't meet the minimum, I may only "Pass" the item or... "Sorry folks, we didn't quite make it on that one. Next item!".
Now, I've also had people ask why I don't sell as much as other auctioneers do, as it appears that everything sells at other auctions and a few have also complained that I "pass" too many items. This is another reason that many other auctioneers prefer to use "seller/house numbers", as it seems to make it appear more interesting to the buyers, as they hear "sold"... after all, that's what they expect at an auction. So, I may not please everyone with my methods, either. But, I just like to be a bit more open about the way auctions are conducted and the bidders get to see what is really selling and which items were "passed". To me, it beats explaining why the item that Sold, showed up again at a later auction.
In summary, let's revisit Section 2-328 of the Texas Business and Commerce Code:
Part (4) is where it states, "if the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved..."
So, if it is "announced" either verbally or within the Terms & Conditions, then "Notice HAS been given" and it is legal.
While I do know that there are some auctioneers that do not legally comply with this law, be sure that you have read all Terms & Conditions and have also listened closely to any opening announcements, as the Disclosure does not have to be provided in both forms of communication. Therefore, some auctioneers may have the disclosure written in their Terms & Conditions, but they may not verbally announce it and leave it to the bidder's own due diligence (and perception). Keep in mind, the law makes it the bidder's responsibility to know what the term and conditions are, prior to bidding. Just because you weren't there during the opening statements, you are still legally bound to those terms when you bid... even if you don't know what was stated. So, find out, BEFORE you bid.
You can read the laws that govern auctions & auctioneers on the Texas Dept of Licensing & Regulations (TDLR) website at:
http://www.license.state.tx.us/auc/auction.htm
You can also download the "Greenbook" at the TDLR web site, which is a compilation of ALL laws that an auctioneer must be aware of, from auction laws to business requirements, trade laws, lien requirements, auto, real estate, wildlife and many, many more. You can find the "Greenbook" here: http://www.license.state.tx.us/auc/greenbook.htm (this is a PDF, so you will need the free Adobe Acrobat Reader)
Keep in mind, if you come to one of our auctions, you will often hear me state that I reserve the right to bid on behalf of any reserves and other similar statements. However, should I forget to make a particular announcement, I ALWAYS have a written Terms & Conditions posted at my auctions and I strongly encourage everyone to carefully read it, as it would take too much time to try to cover every detail when we're trying to get the auction underway. Of course, a few people may think I spend too much time on the opening statements, but I do try to make sure that everyone understands what is going on at OUR auctions.
Jim
Texas-National Auctioneers
Sunday, May 04, 2008
Estate Auction * One Side of the Story
Estate auctions are one of the favorite types of auctions for a large segment of the auction buying crowd. They come for all the great items, from those specialty items to the everyday stuff. Of course, they're hoping to get some bargains, too.
From the other side of the aisle is the Seller, the family... perhaps a spouse, the children, siblings, cousins, aunts & uncles and parents. Of course, an estate auction may be from the result of the passing of a relative or the living estate of a relative that is no longer able to care for their self and having to let go a lifetime of acquisitions... their treasures of memories, collections of fondness and passions, to that special chair they curled up in to watch TV and many other personal possessions.
As an auctioneer, this is the side that is often the most difficult to handle. I'm not talking about the problems that sometimes arise, when a family member thinks something should be worth a lot of money ("because it belonged to great-grandma"). No... the hardest part is dealing with the emotional side of their situation, combined with the economic side they now have to deal with. In some cases, the auctioneer may only be working with an executor with no real strong family ties, but in most cases, it is one of the family that has been chosen for this daunting task, which just adds another emotional load to their own feelings that they are also having to deal with.
My heart goes out to these folks, as I take on the role to help them solve just one of the many problems they have to face. Yes, it's part of the way in which I make my living, but it doesn't make it any easier when I have to tell them that grandma's silver-plated ring, that she loved so much, wasn't worth more than maybe $35. The double-edged sword... since it's not worth much, then "Jenny" decides to keep it OR if it turns out to be worth $3500, "Jenny" decides to keep it. Either way... there are a lot of emotions and feelings that folks have to deal with and sometimes it's hard to let go of things with the memories attached, no matter how big or small they may be in actual value. Then, to watch strangers dig through the "stuff"... those lifetime treasures... well, below is a link to this "side of the story," which provides more insight to this than I can start to offer. After you read the article, also read the comments:
Going, Going, Gone - Sold To The Highest Bidder
Jim Ford, Lic. 12478
Texas-National Auctioneers
From the other side of the aisle is the Seller, the family... perhaps a spouse, the children, siblings, cousins, aunts & uncles and parents. Of course, an estate auction may be from the result of the passing of a relative or the living estate of a relative that is no longer able to care for their self and having to let go a lifetime of acquisitions... their treasures of memories, collections of fondness and passions, to that special chair they curled up in to watch TV and many other personal possessions.
As an auctioneer, this is the side that is often the most difficult to handle. I'm not talking about the problems that sometimes arise, when a family member thinks something should be worth a lot of money ("because it belonged to great-grandma"). No... the hardest part is dealing with the emotional side of their situation, combined with the economic side they now have to deal with. In some cases, the auctioneer may only be working with an executor with no real strong family ties, but in most cases, it is one of the family that has been chosen for this daunting task, which just adds another emotional load to their own feelings that they are also having to deal with.
My heart goes out to these folks, as I take on the role to help them solve just one of the many problems they have to face. Yes, it's part of the way in which I make my living, but it doesn't make it any easier when I have to tell them that grandma's silver-plated ring, that she loved so much, wasn't worth more than maybe $35. The double-edged sword... since it's not worth much, then "Jenny" decides to keep it OR if it turns out to be worth $3500, "Jenny" decides to keep it. Either way... there are a lot of emotions and feelings that folks have to deal with and sometimes it's hard to let go of things with the memories attached, no matter how big or small they may be in actual value. Then, to watch strangers dig through the "stuff"... those lifetime treasures... well, below is a link to this "side of the story," which provides more insight to this than I can start to offer. After you read the article, also read the comments:
Going, Going, Gone - Sold To The Highest Bidder
Jim Ford, Lic. 12478
Texas-National Auctioneers
Saturday, March 29, 2008
Texas Auction Law on Escrow & Paying Clients
Texas State Auction Laws requires Auctioneers to maintain an Escrow Account. Well, there is an exception to this rule, and I'll discuss that, as well.
What is an Escrow Account?
An Escrow Account is a separate and distinct bank account that is used to hold "other peoples" money. This would include any money that is taken in from an auction sale for a client, as the auctioneer waits for all funds to clear the bank, whether it's cash, checks, credit card funds, etc.
Why does an Auctioneer have to have an Escrow Account?
By law, the auctioneer can not "commingle" funds from clients and their own business operating funds. So, they may have their own business bank account, from which they pay their own bills and a separate Escrow Account for monies held for their clients as a result of the auction sales. This prevents the auctioneer from making the mistake of using the clients money to pay his bills and insures that the money is available, when it comes time to pay the client.
How it's supposed to work...
The auctioneer may hold an auction sale for one or more clients. All of the funds generated from the sales are deposited into the Escrow account. By Texas Law, these funds must be deposited into the Escrow account within 72 hours of the sale. After all monies clear the bank (and the auctioneer is satisfied that he's not going to get stuck with a bounced check or something of that nature), the auctioneer then sends the client a check for their goods, minus commissions and/or other expenses that may be due from the client. The auctioneer then makes a check out to his "business" for the commissions and expenses owed for their services and deposits that in his/her Business account.
If everything is done properly, then you wouldn't have this problem:
** High profile auctioneers accused of cheating clients **
How long does an Auctioneer have to pay the client?
By Texas Law, unless otherwise specified in a written contract, the auctioneer has to pay the client within 15 banking days of the auction.
Does an Auctioneer have to have an Escrow account?
Yes... UNLESS they pay the client immediately after the sale or the written contract stipulates other terms, such as sight drafts. So, if the auctioneer accepts checks and credit cards, he/she would normally be required to have an Escrow account, unless the auctioneer has plenty of cash on hand and can give the seller a check on the spot, and absorb any bad checks or credit card charge-backs, until such matters can be resolved. There are a LOT of reasons why this is a BAD IDEA for any auctioneer to even consider. However, I'll leave that as another topic for a future discussion.
Jim Ford, Lic. 12478
Texas-National Auctioneers
What is an Escrow Account?
An Escrow Account is a separate and distinct bank account that is used to hold "other peoples" money. This would include any money that is taken in from an auction sale for a client, as the auctioneer waits for all funds to clear the bank, whether it's cash, checks, credit card funds, etc.
Why does an Auctioneer have to have an Escrow Account?
By law, the auctioneer can not "commingle" funds from clients and their own business operating funds. So, they may have their own business bank account, from which they pay their own bills and a separate Escrow Account for monies held for their clients as a result of the auction sales. This prevents the auctioneer from making the mistake of using the clients money to pay his bills and insures that the money is available, when it comes time to pay the client.
How it's supposed to work...
The auctioneer may hold an auction sale for one or more clients. All of the funds generated from the sales are deposited into the Escrow account. By Texas Law, these funds must be deposited into the Escrow account within 72 hours of the sale. After all monies clear the bank (and the auctioneer is satisfied that he's not going to get stuck with a bounced check or something of that nature), the auctioneer then sends the client a check for their goods, minus commissions and/or other expenses that may be due from the client. The auctioneer then makes a check out to his "business" for the commissions and expenses owed for their services and deposits that in his/her Business account.
If everything is done properly, then you wouldn't have this problem:
** High profile auctioneers accused of cheating clients **
How long does an Auctioneer have to pay the client?
By Texas Law, unless otherwise specified in a written contract, the auctioneer has to pay the client within 15 banking days of the auction.
Does an Auctioneer have to have an Escrow account?
Yes... UNLESS they pay the client immediately after the sale or the written contract stipulates other terms, such as sight drafts. So, if the auctioneer accepts checks and credit cards, he/she would normally be required to have an Escrow account, unless the auctioneer has plenty of cash on hand and can give the seller a check on the spot, and absorb any bad checks or credit card charge-backs, until such matters can be resolved. There are a LOT of reasons why this is a BAD IDEA for any auctioneer to even consider. However, I'll leave that as another topic for a future discussion.
Jim Ford, Lic. 12478
Texas-National Auctioneers
Saturday, November 17, 2007
Fiduciary Duties of an Auctioneer
An auctioneer’s fiduciary duty is to the seller. This means the auctioneer is an agent for the seller and must act in the best interests of the seller.
This falls back on the basis of general law, widely accepted in all courts of law throughout the U.S.:
(1) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument (i.e. “contract”).
(2) “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in subdivision (1) is owed.
In addition, the field of real estate is usually quoted in many examples because they are basically the only industry that allows for “dual agency”. However, to completely understand this “agency”, you must understand that the Broker has ultimate responsibility for all transactions by any salespersons working under the supervision of the Broker’s license, therefore the actual Broker is undertaking the role of dual agency (not the individual salespersons, as I will explain). In other words, the Broker can not be a direct party in the transaction (in any way and must remain neutral, or without specific directions to either salesperson) and will appoint two different salespersons to work for the seller and the buyer, since an individual agent cannot represent a fiduciary to both. On the same basis of law, if a RE salesperson has not specifically contracted to act as a buyer’s agent, then it is automatically assumed that the salesperson is acting on behalf of the seller, therefore is the fiduciary only for the seller.
To support that last statement, the Federal Trade Commission (FTC) speaks of this in numerous publications, one of which is:
http://www.ftc.gov/os/comments/realestatecompetition/518795-00391.htm
“Fiduciaries are held to a higher standard under common law. Upon visiting, for example, a store, a consumer does not expect, or have any right to expect, the store’s salesperson to be looking out for the consumer’s best interest. But in hiring a trusted lawyer or real estate agent or investment trust company (you may also add “auctioneer”) to act for him, a client expects full fiduciary responsibility, including undivided loyalty, with no undisclosed conflicts of interest. Consumers are more easily misled when, as clients, not just customers, they are giving their trust to their own professional fiduciary.“
In addition, you can find additional commentary on the basis of fiduciary duties at:
http://en.wikipedia.org/wiki/Fiduciary
“Conflict of duty and duty
A fiduciary’s duty must not conflict with another fiduciary duty. Conflicts between one fiduciary duty and another fiduciary duty arise most often when a lawyer or an agent, such as a real estate agent (also add “auctioneer”), represent more than one client, and the interests of those clients conflict. This usually occurs when a lawyer attempts to represent both the plaintiff and the defendant in the same matter, for example. The rule comes from the logical conclusion that a fiduciary cannot make the principal’s interests a top priority if he has two principals and their interests are diametrically opposed; he must balance the interests, which is not acceptable to equity. Therefore, the conflict of duty and duty rule is really an extension of the conflict of interest and duty rules.”
Also see:
http://en.wikipedia.org/wiki/Conflict_of_interest
In other words, as a sole individual/entity, you can not have a conflict of fiduciary duties between the parties, or you are subject to a dereliction of duty to one or both parties. Therefore, under the basis of general law, it basically means that when an auctioneer signs a contract with a seller (the principal), the auctioneer has a fiduciary duty to the seller to act as their primary agent on their behalf and in their best interests or “as they would act”.
Now, this does not mean that if the seller misrepresents something, that the auctioneer doesn’t have a “duty” to the buyer to correct the problem. However, the auctioneer and the seller are both responsible for providing a reasonable duty to provide said goods in the condition stated for the agreed upon price/trade, as this falls under the Fair Trade Agreement statutes (that you can also search for under the FTC’s website). However, this does not create a fiduciary duty to the buyer, but only serves to treat the buyer fairly under the FTC’s Fair Trade Agreement.
The primary point regarding the auctioneer’s fiduciary duty to act on behalf of the seller. The difference between the Fair Trade Act regarding buyers and fiduciary duty to the client (seller) is the same, regardless of whether it is a real estate transaction or the sale of any other type of property.
A Fiduciary can not represent two different parties with opposing intents. The primary fiduciary is to the client that has contracted the auctioneer to sell (act on their behalf for the sale of) their goods.
Some have attempted to imply that the Terms and Conditions of Sale implies a fiduciary duty. This is not the case, as the FTC’s Fair Trade Act specifically demonstrates that it is only an agreement for the terms of the sale and creates no other duty upon the seller (or their agent) as a representative of the buyer, as they are opposing parties until the final agreement has been reached. The Terms & Conditions (terms of their agreement) for an auction are only the conditions of finalizing the transaction, which both, the buyer and the auctioneer (seller’s fiduciary agent) are agreeing to as part of the sale, with only price being the final factor and determined upon the call of “Sold”. Therefore, the auctioneer has only “perfected a sales agreement” (that’s how a lawyer would state it) with the buyer on behalf of the seller (the principal fiduciary).
The primary point is regarding the auctioneer's fiduciary duty to act on behalf of the seller. The difference between the Fair Trade Act regarding buyers and fiduciary duty to the client (seller) is the same, regardless of whether it is a real estate transaction or the sale of any other type of property.A Fiduciary can not represent two different parties with opposing intents. The primary fiduciary is to the client that has contracted the auctioneer to sell (act on their behalf for the sale of) their goods.
Some have attempted to imply that the Terms and Conditions of Sale implies a fiduciary duty. This is not the case, as the FTC's Fair Trade Act specifically demonstrates that it is only an agreement for the terms of the sale and creates no other duty upon the seller (or their agent) as a representative of the buyer, as they are opposing parties until final agreement has been reached. The terms of their agreement are only the conditions of finalizing the transaction. Therefore, the auctioneer has only "perfected a sales agreement" (that's how a lawyer would state it) with the buyer on behalf of the seller (the principal fiduciary).
Wednesday, October 04, 2006
How Our Auctions Work
We recently received an email from someone who felt that we should change our format and how we conduct our auctions. While we are always open to suggestions, some comments still amaze me... In the following, I have posted my responses to this individual who seems to feel that we shouldn't make money or that we should only offer the goods that he is interested in buying.
(Please note: Spelling & grammatical errors are those of the particular person, as this is copied from the original email and response. Some parts may be slightly modified from the original response, in order to insure clarity of the topic.)
Denny (not the real name, of course)
Thanks for your comments. I'm not exactly sure what is meant or intended by some of the suggestions, but I will offer my responses to each of your comments below. Some auctioneers aren't going to like me much, because I may be giving away some of their "secrets", but we try to help everyone understand how auctions really work, how some other auctions operate, and how WE operate.
---
I guess I'm not sure how I should get a bid if a suggested bid is not made, as most people will sit there until they hear a number that they might want to start it at and put up their card. However, I think I know what you may mean... if you've been to other auctions, it seems that the items always get a decent starting bid and almost everything sells! This is because most of those use "House Numbers" and run the bid up to the "reserve" price and sells it back to the house number if they don't get a bid at or above the minimum reserve price that must be met before they can sell the item. A "House Number" is used as a consignor bidder number, since at a reserve auction, consignors or their agent may be allowed to bid. Of course, this gives the appearance that everything gets bids and is sold. There have been many discussions in auctioneer forums about this. While it may not be illegal, in our opinion, it doesn't seem ethical. I'm not trying to fool anyone and I let it be known that we don't use this format. Perhaps I should reconsider my position and do like the others?
In accordance with Texas Law, ALL Auctions are With Reserve, unless otherwise stated. This means, unless an auction is advertised as Absolute, then it IS With Reserves. There are very few auctions that are advertised as Absolute. Again, many auctioneers leave it to the buyers perception and don't make a big deal about this, so people may think that nothing has a reserve and HAS to sell. This is completely wrong. At an auction with reserve, it doesn't mean that everything has a reserve, nor does it mean that items without a reserve HAVE to be sold. The reason that the law is written in this manner, is to allow the discretion of the auctioneer to be used to also reject bids that are deemed to be Unacceptably low. An auctioneer has a fiduciary responsibility to the seller to try to get the highest price possible. The auctioneer also has a responsibility to the buyer to treat them in a fair and ethical manner, but this does not mean that he/she is required to sell an item for a two dollar bid if it is deemed to be unacceptably low for the item being offered for sale. So, if an item is worth $500 and someone wants to offer a $10 bid, the auctioneer is not required to accept it. At many other auctions, in an effort to keep this from happening, they may start the item at a higher starting bid and "run through the bid" in the hopes someone will jump in and bid before they sell back to the house number, or if they accept the $10 offer, they may then bid on behalf of the consignor's reserve until they get to the reserve price and sell it back to the house number (if they do not get a floor bid above the minimum reserve). If we do not get a reasonable starting bid, we simply "pass" the item. If an item has a reserve and only one person is bidding, we will bid on behalf of the reserve until it is met or it will be passed if the reserve is not met. However, perhaps you meant that we should announce whether a particular item has a reserve. There is one problem with this (which is why many other auctions use the "house number" and just run the bid up to the reserve)... If an item is announced that it has a reserve, most often it won't even get a starting bid. People want to bid, but if they are told it has a reserve, they automatically think it's going to sell too high (as implied in your statement) and won't even bid. While we have very few items with reserves, MOST of the items we do have with reserves tend to sell for more than the reserve price. This is because we do not allow consignors to give unreasonably high reserves or we won't accept their goods.
A primary point I would like to point out... we had bidder leave an absentee bid for a RedWing Crock of $200, because they had to leave for a little while and didn't want to miss it. We explained that it would be opened for bidding at one-half of their their absentee bid and that we would bid on behalf of their maximum absentee bid. The person came back before we brought it up and we pulled the absentee bid. I asked for $100 to start the bidding and they didn't even raise their card. When we passed the item, someone called out $25, which we felt was unacceptably low. Therefore, as I stated above, the auctioneer is responsible to obtain a reasonable price for the consignor and the bid was rejected. Perhaps we may need to reconsider our position and do it like the other auction houses that sell it back to a house number?
Please keep in mind... if you consigned goods to our auction, we would offer you the same consideration to help insure that your items weren't sold for an unreasonably low amount. Bargains are one thing... but, if I only had a $25 bid on a $500 item, I don't think you'd be too happy with me, as a consignor, if I sold it for $25. However, if I tell the bidders that this item has a reserve, then the likelihood of even getting a bid is almost zero. Therefore, we do not announce reserve prices or whether the item even has a reserve. This helps to get the bidding started and most often results in a sale.
Most of Comment #2 addresses this.
Most of the items we offer, do NOT have Reserves and if we get a bid, IT SELLS! However, if no bid is offered or a reasonable bid is not offered, it is "passed," as stated above.
We try to describe the merchandise to the best of our ability. We encourage everyone to attend during the Preview time and inspect all items prior to bidding. Most people that have an interest in an item, already know what it is and are waiting for it to come up for bidding, as they have seen the item while they were Previewing before the auction started. If we have a particular item that we feel needs a more detailed description, such as some higher dollar items, we may spend a few moments to make sure everyone knows what it is and in some cases, a little education or history on the items and perhaps it's retail value. However, we don't have the staff or the time to research every item and we leave it to the Bidders to determine how much they are willing to bid, as they may often know more about an item than we do. If we have a particular item, such as the Roseville or Red Wing items in a previous auction, we try to find out a little about the item, but we can't do this for everything. It's up to the bidder to make their own decision on the item and bid according to their own judgment.
We have a wide assortment of items, from "Japan" to "good old U.S.A" and other parts of the world. While one person may not care for "Made in Japan," there are many others that collect them. Those that are looking for the "Japan" items may be patiently waiting for those items, while we're also selling McCoy, Hull, Roseville, Red Wing, Haegar, Rosenthal, and other items. Some are looking for smalls, general household goods, furniture, and many other things and are also waiting through the other things they may not have an interest in... Our auctions usually feature 350 to over 500 items, which sometimes is more than we may be able to get to in the evening. If a particular item did not make it to the auction block this week, it could possibly show up again next week or within a couple weeks or so.
As far as "junk"... I'm not sure which items you are referring to... I had one person tell me that they thought Roseville was junk, but to others it is HIGHLY collectible (not to mention, expensive "junk"). The old adage "One man's junk is another man's treasure" has real significance in the auction business. We try to offer a wide variety of goods to suit the varying interests of those who attend. By the same token, I'm often surprised at what some people bid on and how much it sells for, when I didn't think it was worth much. By the same token, I'm sometimes surprised by how little a particular item brings.
You are correct in some cases. We also have a lot of items that are brought in from estates that we must sell. If it is a high value item that the person tried to repair, it may still be offered, although we know that it won't bring anywhere near what it might have. But it doesn't mean that is doesn't have an interest to someone. If it still doesn't sell, it may end up in a box lot. We do not normally accept such items from a Consignor. But, if it's an estate, in most cases we have to take everything and try to get the best price for the estate, as we are expected to do so by law and the administrator of the estate. Sometimes, we may miss things and not realize that an item had been repaired, unless someone points it out. We're human, but we do try the best we can to make sure that people know what they are getting. However, this is an auction and like all auctions, everything is offered "as-is, where-is" and the buyer is responsible for making their own determination of condition, value and suitability of the items prior to bidding.
As I stated, this is an auction and like most EVERY auction, everything is sold "as-is, where-is" with no warranties or guarantees expressed or implied. This is standard throughout the auction business. If I state that an item works, then we have made a guarantee and we will stand by it. If we weren't able to show that it worked when it was brought up and you get home and it doesn't work, as long as you contacted us promptly to report the problem, we would be happy to refund you for the item. Otherwise, it is up to the bidder to determine the items' condition, size, quality and value, separate and distinct from any representation made, as stated in the Terms & Conditions of almost every auction in the U.S.A.
If we don't make a profit, we won't be around very long. There is no business that can sustain a loss a stay in business. So far, we aren't making a profit, yet. People attending our auctions have definitely been getting fair deals, as many items may sell for less than they should. What is considered fair? Would you consider it fair if you were the seller and your items were sold for only a small fraction of their wholesale value (not to mention the retail value)?
Or is it that it just appears that some items are selling lower at other auctions and being sold to a house number? Perhaps we need to reconsider our operations and start using this method also?
We're trying to run an honest and ethical auction. It's hard to do when you're trying to also overcome the perceptions that so many people have, when they've seen it done differently and think that things are selling, when they're not. But, we hope to build our customer base on our reputation of honesty and try to help others understand that we are the ones to come to if you want someone that you can trust.
If you would like to come by, we would be happy to sit down and talk about the auction and listen to your suggestions and try to see how we can all learn from each other.
Thanks,
Jim & Patricia Ford
Texas-National Auctioneers
Office: 281-479-7848
http://www.t-na.com
(Please note: Spelling & grammatical errors are those of the particular person, as this is copied from the original email and response. Some parts may be slightly modified from the original response, in order to insure clarity of the topic.)
Denny (not the real name, of course)
Thanks for your comments. I'm not exactly sure what is meant or intended by some of the suggestions, but I will offer my responses to each of your comments below. Some auctioneers aren't going to like me much, because I may be giving away some of their "secrets", but we try to help everyone understand how auctions really work, how some other auctions operate, and how WE operate.
---
Comment...........: i would like to make a comment about your auction my opinion is that it is not been done in the right format .
1. the auctioner is not susposed to start with a bid as you do. just offer the item with discription after the first bid is made then go from there
I guess I'm not sure how I should get a bid if a suggested bid is not made, as most people will sit there until they hear a number that they might want to start it at and put up their card. However, I think I know what you may mean... if you've been to other auctions, it seems that the items always get a decent starting bid and almost everything sells! This is because most of those use "House Numbers" and run the bid up to the "reserve" price and sells it back to the house number if they don't get a bid at or above the minimum reserve price that must be met before they can sell the item. A "House Number" is used as a consignor bidder number, since at a reserve auction, consignors or their agent may be allowed to bid. Of course, this gives the appearance that everything gets bids and is sold. There have been many discussions in auctioneer forums about this. While it may not be illegal, in our opinion, it doesn't seem ethical. I'm not trying to fool anyone and I let it be known that we don't use this format. Perhaps I should reconsider my position and do like the others?
2.all high dollar items if you expect to get or even come close to the value then it should be stated as a reserve auction so people will know that it will be going for a higher price.
In accordance with Texas Law, ALL Auctions are With Reserve, unless otherwise stated. This means, unless an auction is advertised as Absolute, then it IS With Reserves. There are very few auctions that are advertised as Absolute. Again, many auctioneers leave it to the buyers perception and don't make a big deal about this, so people may think that nothing has a reserve and HAS to sell. This is completely wrong. At an auction with reserve, it doesn't mean that everything has a reserve, nor does it mean that items without a reserve HAVE to be sold. The reason that the law is written in this manner, is to allow the discretion of the auctioneer to be used to also reject bids that are deemed to be Unacceptably low. An auctioneer has a fiduciary responsibility to the seller to try to get the highest price possible. The auctioneer also has a responsibility to the buyer to treat them in a fair and ethical manner, but this does not mean that he/she is required to sell an item for a two dollar bid if it is deemed to be unacceptably low for the item being offered for sale. So, if an item is worth $500 and someone wants to offer a $10 bid, the auctioneer is not required to accept it. At many other auctions, in an effort to keep this from happening, they may start the item at a higher starting bid and "run through the bid" in the hopes someone will jump in and bid before they sell back to the house number, or if they accept the $10 offer, they may then bid on behalf of the consignor's reserve until they get to the reserve price and sell it back to the house number (if they do not get a floor bid above the minimum reserve). If we do not get a reasonable starting bid, we simply "pass" the item. If an item has a reserve and only one person is bidding, we will bid on behalf of the reserve until it is met or it will be passed if the reserve is not met. However, perhaps you meant that we should announce whether a particular item has a reserve. There is one problem with this (which is why many other auctions use the "house number" and just run the bid up to the reserve)... If an item is announced that it has a reserve, most often it won't even get a starting bid. People want to bid, but if they are told it has a reserve, they automatically think it's going to sell too high (as implied in your statement) and won't even bid. While we have very few items with reserves, MOST of the items we do have with reserves tend to sell for more than the reserve price. This is because we do not allow consignors to give unreasonably high reserves or we won't accept their goods.
A primary point I would like to point out... we had bidder leave an absentee bid for a RedWing Crock of $200, because they had to leave for a little while and didn't want to miss it. We explained that it would be opened for bidding at one-half of their their absentee bid and that we would bid on behalf of their maximum absentee bid. The person came back before we brought it up and we pulled the absentee bid. I asked for $100 to start the bidding and they didn't even raise their card. When we passed the item, someone called out $25, which we felt was unacceptably low. Therefore, as I stated above, the auctioneer is responsible to obtain a reasonable price for the consignor and the bid was rejected. Perhaps we may need to reconsider our position and do it like the other auction houses that sell it back to a house number?
Please keep in mind... if you consigned goods to our auction, we would offer you the same consideration to help insure that your items weren't sold for an unreasonably low amount. Bargains are one thing... but, if I only had a $25 bid on a $500 item, I don't think you'd be too happy with me, as a consignor, if I sold it for $25. However, if I tell the bidders that this item has a reserve, then the likelihood of even getting a bid is almost zero. Therefore, we do not announce reserve prices or whether the item even has a reserve. This helps to get the bidding started and most often results in a sale.
3. an auction is susposed to be fun not if you dont get what you want for a item then you want (sic) sell it.
Most of Comment #2 addresses this.
Most of the items we offer, do NOT have Reserves and if we get a bid, IT SELLS! However, if no bid is offered or a reasonable bid is not offered, it is "passed," as stated above.
4.give better discription of all merchandise
We try to describe the merchandise to the best of our ability. We encourage everyone to attend during the Preview time and inspect all items prior to bidding. Most people that have an interest in an item, already know what it is and are waiting for it to come up for bidding, as they have seen the item while they were Previewing before the auction started. If we have a particular item that we feel needs a more detailed description, such as some higher dollar items, we may spend a few moments to make sure everyone knows what it is and in some cases, a little education or history on the items and perhaps it's retail value. However, we don't have the staff or the time to research every item and we leave it to the Bidders to determine how much they are willing to bid, as they may often know more about an item than we do. If we have a particular item, such as the Roseville or Red Wing items in a previous auction, we try to find out a little about the item, but we can't do this for everything. It's up to the bidder to make their own decision on the item and bid according to their own judgment.
5.expect that not everyone likes japan made items try some good old usa made items.
6.never offer junk you cannot expect to succeed in being a better auction house if you continue in operateing that way and you wonder why people leave or you cant draw more people in to your auctions.
We have a wide assortment of items, from "Japan" to "good old U.S.A" and other parts of the world. While one person may not care for "Made in Japan," there are many others that collect them. Those that are looking for the "Japan" items may be patiently waiting for those items, while we're also selling McCoy, Hull, Roseville, Red Wing, Haegar, Rosenthal, and other items. Some are looking for smalls, general household goods, furniture, and many other things and are also waiting through the other things they may not have an interest in... Our auctions usually feature 350 to over 500 items, which sometimes is more than we may be able to get to in the evening. If a particular item did not make it to the auction block this week, it could possibly show up again next week or within a couple weeks or so.
As far as "junk"... I'm not sure which items you are referring to... I had one person tell me that they thought Roseville was junk, but to others it is HIGHLY collectible (not to mention, expensive "junk"). The old adage "One man's junk is another man's treasure" has real significance in the auction business. We try to offer a wide variety of goods to suit the varying interests of those who attend. By the same token, I'm often surprised at what some people bid on and how much it sells for, when I didn't think it was worth much. By the same token, I'm sometimes surprised by how little a particular item brings.
7. some of what you call antiques has been repaired and not by a restorer.
You are correct in some cases. We also have a lot of items that are brought in from estates that we must sell. If it is a high value item that the person tried to repair, it may still be offered, although we know that it won't bring anywhere near what it might have. But it doesn't mean that is doesn't have an interest to someone. If it still doesn't sell, it may end up in a box lot. We do not normally accept such items from a Consignor. But, if it's an estate, in most cases we have to take everything and try to get the best price for the estate, as we are expected to do so by law and the administrator of the estate. Sometimes, we may miss things and not realize that an item had been repaired, unless someone points it out. We're human, but we do try the best we can to make sure that people know what they are getting. However, this is an auction and like all auctions, everything is offered "as-is, where-is" and the buyer is responsible for making their own determination of condition, value and suitability of the items prior to bidding.
8.and be reasonable you should always offer a 30 day return policy
As I stated, this is an auction and like most EVERY auction, everything is sold "as-is, where-is" with no warranties or guarantees expressed or implied. This is standard throughout the auction business. If I state that an item works, then we have made a guarantee and we will stand by it. If we weren't able to show that it worked when it was brought up and you get home and it doesn't work, as long as you contacted us promptly to report the problem, we would be happy to refund you for the item. Otherwise, it is up to the bidder to determine the items' condition, size, quality and value, separate and distinct from any representation made, as stated in the Terms & Conditions of almost every auction in the U.S.A.
9.and finaly its not all about the auction house makeing all the profit its also about the people that attend the auctions to get fair deals also
If we don't make a profit, we won't be around very long. There is no business that can sustain a loss a stay in business. So far, we aren't making a profit, yet. People attending our auctions have definitely been getting fair deals, as many items may sell for less than they should. What is considered fair? Would you consider it fair if you were the seller and your items were sold for only a small fraction of their wholesale value (not to mention the retail value)?
Or is it that it just appears that some items are selling lower at other auctions and being sold to a house number? Perhaps we need to reconsider our operations and start using this method also?
We're trying to run an honest and ethical auction. It's hard to do when you're trying to also overcome the perceptions that so many people have, when they've seen it done differently and think that things are selling, when they're not. But, we hope to build our customer base on our reputation of honesty and try to help others understand that we are the ones to come to if you want someone that you can trust.
If you would like to come by, we would be happy to sit down and talk about the auction and listen to your suggestions and try to see how we can all learn from each other.
Thanks,
Jim & Patricia Ford
Texas-National Auctioneers
Office: 281-479-7848
http://www.t-na.com
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