Times are hard and money is tight. Frugal is “in” and bargains are chic. Folks today are looking to stretch dollars farther and auctions provide a prime opportunity for doing so - but some auctions offer greater chances at bargains than others.

During the past two weeks, we have looked at some of the key indicators that smart shoppers can watch for when searching for auctions that are most likely to offer sweet buys. We have seen that the identity and type of the seller, characteristics of the auctioneer, and auction type can all provide insight. Now we are going to consider several other factors that can impact selling prices, starting with the two, predominant methods of auction.

An “auction with reserve” is one where the seller controls the right to sell or not, based upon whether the seller wishes to accept the highest bid made for the auction lot. There are numerous variations with a reserve auction. The seller might establish a certain amount in advance of the auction which the seller will accept, or the seller might wait to see what the highest bid is before deciding whether to accept it. If the seller establishes a reserve amount in advance of the auction, the seller might communicate that number to the auctioneer or not. The seller might establish a reserve amount and have it published for the bidders to know or not. 

Bidders searching for bargains should know that sellers utilize an auction with reserve when they want to protect goods from an unwanted sacrifice. So a seller might establish a reserve amount of $5,000 for a car, because the seller does not want to take a chance that the car would attract a high bid for less than that amount and be sold. Auctions with reserve, by definition, typically do not provide an opportunity for buyers to purchase for extremely low prices.

On the other hand, an “auction without reserve” offers no downside price protection. The overriding characteristic of this auction method is that each lot will be sold to the highest bidder for it, regardless of the amount of the high bid. Several common phrases signal such an auction to prospective bidders. These include “absolute auction,” “unreserved auction,” “no reserve auction,” and “selling to the highest bidder.” Theoretically, when an auctioneer advertises an auction with one of these descriptors, the chance for bidders to buy bargains is enhanced.

By example, if the car that the seller wants $5,000 for (but does not protect with a reserve) is offered in an unreserved auction and attracts a high bid of only $500, it will be sold for that amount.

The problem is that theory does not always match reality. In some “unreserved” auctions, smoke-and-mirrors auctioneers and their sellers attempt to bait bidders with the lure of bargains, only to trick them into paying premium prices through fraud. Four common ploys are used. 

The first mimics a duck-hunting trick. Unscrupulous auctioneers use decoys as fake bidders to bid against legitimate bidders and, thereby, drive prices higher. These decoy bidders are called “shills” and they can be anyone - someone working for the auctioneer or seller, or even the seller himself. 

The second sham is another that is akin to a duck hunting technique, but no decoy is involved. Like the hunter blows a call that mimics the quacking of a duck, the auctioneer calls fake bids that appear to come from real bidders, but do not. The ruse is to fool bidders into bidding against “a phantom,” with the result being bids go up even when there is no legitimate competition for the lot.

The third subterfuge is to fool bidders into believing they are bidding for what they are not. Cheap reproductions and fakes of many desirable goods can be easily obtained. These near-worthless pieces often fetch strong prices when offered to naive bidders who believe they are bidding to buy the real thing for a bargain.

The bargain is all the seller’s and auctioneer’s, however, when they get $150 from a buyer for what someone purchased for about $3 from an importer.

The final threat is seller intervention. Despite an auctioneer advertising an unreserved auction, some sellers will intercede in a “sale” and simply refuse to sell a piece for a price that the seller finds unacceptable. The result is a bargain denied with the burden and cost of challenging this illegal move left on the disappointed bidder.

Unreserved auctions are a prime indicator of potentially good buying opportunities, but bidders need to know about these tricks and learn all they can about the reputation of an auctioneer before blindly participating in an auction.

There are plenty of honest auctioneers, but also too many who lean the other way. Bidders must have their eyes open and remain on guard throughout the auction process.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Steve Proffitt may write to him in care of this publication.