Refresher Course

At the auction, you get to name your price

By Michael Baadke

Stamp auctions provide collectors (and dealers) with an opportunity to set their own prices when they purchase stamps or covers. However, the price a bidder chooses has to be high enough to beat out the bids of other potential buyers.

Figure 1. Catalogs for public auctions and mail-bid auctions (top). Listings in the catalog (bottom) describe each lot and provide additional information for the prospective bidders.
Figure 2. Bidders must read and understand the terms of sale before participating in any stamp auction. Click on image to enlarge.

There are usually three principal players in every auction sale: the seller (or consignor), the auctioneer and the bidder. The seller's material being sold at the stamp auction is divided up into lots by the auctioneer who conducts the sale. A lot may consist of a single stamp or cover, or it may be a group of items.

Lots are offered for sale to bidders who make offers to purchase by bidding. There may be only one bidder who has an interest in a certain lot, but often there are several bidders competing at the same time. The bidder who offers the most for the lot is the winning bidder, and he agrees to purchase the lot for the price bid. Most auctions do not require that a bidder attend in person. Bidders can send their offers in the mail, by fax, by phone, or by hiring an auction agent as a bidding representative.

There are a number of different types of auctions, ranging from stamp club auctions where the bidding is friendly and the average lot price is low, to the most prestigious public auctions where high-priced rarities can sell for as much as a million dollars after an impassioned bidding battle.

Some collectors believe the auction process is complicated or they do not understand how auctions work, so they are reluctant to participate. Any collector who regularly purchases stamps and covers should consider learning more about auctions, for often these sales give the collector an opportunity to obtain stamps and covers at prices well below normal retail values.

In fact, many of the most active bidders at auctions are stamp dealers themselves, obtaining material that they will later sell to collectors. The auction may often give the collector the chance to obtain items at the wholesale prices the dealers themselves pay.

This week we'll look at public auctions and mail-bid auctions. In a future Refresher Course, we'll take a look at the auction scene on the Internet.

In some ways public auctions and mail-bid auctions are very similar, but there are important differences.

For each type of sale, auction catalogs are printed and made available to prospective buyers. The catalog contains a list of the lots that will be sold at auction, often with photographs of the more interesting items. A number of different stamp auction catalogs are shown at the top of Figure 1. A typical auction listing for one lot, a single stamp, is shown at the bottom of Figure 1. Collectors can obtain catalogs by writing or calling the auction house. Unless you are an established customer, there may be a charge of a few dollars to recover some of the expense of printing and mailing. Larger, more elaborate catalogs cost more.

Auction houses regularly advertise in stamp hobby publications such as Linn's Stamp News, and the ads tell how to obtain their catalogs. The auction catalog also contains very important information about bidding and payment. This information is often titled "terms of sale." An example of terms of sale from one auction house is shown in Figure 2.

Almost all auction houses add a buyer's premium, often 10 percent of the winning bid, so a collector who is bidding must keep in mind that this additional fee will be added to his bill. In some cases sales tax is also charged. This is just some of the information contained in the terms of sale. Other details may include how to place bids, payment methods, collecting your lots, and more.

It is essential that bidders read and understand the terms of sale before participating in an auction. Auction house employees are usually happy to clear up any confusion you may have in the days before the sale, but they probably cannot take time to explain the entire process over the telephone or in person. The terms of sale vary from one auction house to the next, so all bidders must check the terms for each sale in which they plan to participate.

BID INCREMENTS
up to
Increase
 
up to
Increase
$10
$.50
 
$500
$20
$24
$1.00
 
$1,000
$25
$50
$2.00
 
$2,500
$50
$75
$2.50
 
$5,000
$100
$100
$5.00
 
$7,500
$250
$300
$10.00
 
$10,000
$500
more than $10,000 at approximately 5% increments
Figure 3. Auction bids must follow increment levels set by the auction house. These levels vary from auction to auction.

Each catalog also includes a bid sheet to use with mail or fax bids. Bidders write down one bid for each lot they hope to purchase: the amount should be the most they are willing to spend to obtain the lot. Bids must be placed in specific increments, depending on the value of the bid. One sample chart is shown in Figure 3. Actual increment levels vary from sale to sale. This chart shows that bids up to $300 must be given in $10 increments. Therefore, a bid of $240 is acceptable, but a bid of $238 is not. Depending on the terms of sale, the $238 bid would likely be reduced automatically to $230.

Often the auction catalog will list an estimated sale price or a recent stamp catalog value for each lot. Bidders may bid less or more than that estimate. However, most auction houses will disregard bids they believe are unrealistically low. If you bid $5 for an unused 1847 5¢ Benjamin Franklin stamp of the United States (catalog value $5,250) with the hope that your bid will be the only one received, you might as well not bother. An auctioneer who accepts such a bid would be out of business very quickly because no seller would trust him to auction his material.

If you bid high, you may obtain the item you want without having to pay the full amount of your bid. Most auction houses award successful bids at one increment above the second highest bid. Therefore, if your bid on one lot is $120, and the next highest bid is $80, you would win the lot for $85, using the increment chart shown in Figure 3. However, it is important to understand that in close bidding the full amount of your bid will be accepted if you are the winning bidder, and you will be responsible for paying the full amount of your bid plus the buyer's premium.

Obviously it's important to consider your budget when placing bids. If you win every bid at your maximum level, you have to pay all the money you bid, plus the buyer's premium.

Figure 4. Floor bidders and observers may attend public auctions, but mail bids are also accepted. With mail-bid auctions, there is no event where floor bidders participate.

Public auctions are held at a location open to the public. Anyone interested may attend, and anyone attending who registers may bid during the auction. Figure 4 shows a well-attended public auction in Chicago.

Sometimes there will be only a few bidders in attendance because most bids come in by mail or fax. Mail-bid auctions do not have this type of public forum. Instead, the auction is conducted on the basis of mail bids only.

Another difference between the public auction and the mail-bid auction is that prospective bidders may examine the items offered at public auction during specified viewing times at the auctioneer's offices. This is generally not possible for most mail-bid auctions.

Both types of auctions usually offer return policies if an item has been misdescribed by the auction house. In some cases, however, an auction house may have a "no return" policy on some or all lots that are sold "as is" or that include a certain number of items. Once again, the terms of sale should spell out return policies.

In any case, it is wise to look for dealers who are members of established stamp organizations such as the American Stamp Dealers Association, the National Stamp Dealers Association or the American Philatelic Society. These groups have rules of ethics by which their members must abide.

The auctioneer represents the sellers of the items at auction. Instead of submitting mail or fax bids to the seller's representative (the auctioneer), many bidders prefer having someone representing them at the public auction.

Auction agents work for prospective buyers, submitting bids in person during the sale. They charge a fee, generally a small percentage of the price of each lot purchased. One important benefit of using an agent is having someone familiar with auctions bidding to obtain items for you at the lowest possible cost.

Agents can also examine public auction lots on behalf of clients and answer questions the client may have about the lot or the auction in general. Auction agents advertise in stamp hobby periodicals. Some auction houses provide the names and phone numbers of agents who are regularly present at their sales.

Even among public auctions the type of sale may vary considerably. Some auctions deal primarily in stamps of one country or region, such as the United States, Scandinavia or Asia. Other auctions may prominently feature errors and freaks on stamps.

Look for auction houses that cater to your specific interests, and request a catalog to review. Once you find a sale that offers the type of material you're looking for, get familiar with the terms of sale. With a little study and some careful consideration, you have a good chance of becoming a successful auction bidder.