Practical Advice: Auctions, Part II: Consigning and Selling

From the perspective of the consignor, the four types of auctions described in the earlier article on buying at auction (Practical Advice: Auctions, Part I - Bidding and Buying) are useful for liquidating different types of material. A few general questions regarding terms for consignors apply to all four, however:

• What is the seller's commission? Most stamp auctions charge a 10%-15% commission of the gross realization from sellers, but some charge as much as 25%. If a consignment is large enough, many an auctioneer will reduce or even eliminate the seller's commission, because he is in competetion with other auctioneers who also may wish obtain the consignment.
  
• What is the buyer's commission? Most stamp auctions charge a commission to the buyer as well as to the seller. While the seller doesn't pay this commission directly, it does affect how much prospective buyers are willing to bid for his lots.
  
• Does the auctioneer allow consignors to set minimum reserves on their lots? This is important because reserves eliminate the possibility of the consignor's lots selling for too little.

• What are the minimum consignment values and minimum lot values?

• Must the consignor pay lotting fees for unsold lots? Are there any other fees for which the consignor is responsible?

• How many catalogs are sent out and how many are sent overseas?

• What is the auctioneer's record when he has sold similar material in the past? It's always prudent to request the records of realizations from recent auctions in which the auctioneer has offered material similar to the consignor's. Many of the same bidders who have purchased this material will probably bid on yours.
  
  
• How soon after the auction does the consignor get paid?



• Is the auctioneer reputable? This can be determined by checking with the membership department of the philatelic society to which he belongs.
  

Each of the four types of auctions is appropriate for different types of consignment, and a fifth, auctions which specialize in a particular collecting area, can also be useful.

• Premier Auctions require the highest minimum consignment and lot values. Lately, they've been trending towards charging high consignor's and buyer's commissions of 15% to 20%. Unless your consignment is extremely valuable, the premier auctioneer will be inflexible in maintaining his terms. On the positive side, premier auctions tend to achieve high realizations for better material, because their clientele tends to be very affluent.
  



• Specialty Auctions focus on stamps of a particular collecting area. They're generally similar to premier auctions, and also tend to achieve high realizations, because their clientele specializes in the stamps which they're offering.
  



• "Second Tier" U.S. and Worldwide Auctions neither specialize nor do they publish expensive catalogs. Commissions tend to be more reasonable at such auctions, and minimum consignment and lot values are lower. Frequently, the auctioneer will be more flexible as to terms if the consignment is of medium value or greater, or the consignor has established a relationship with the auctioneer. Realizations are across the board, and at most such auctions, there will be both bargains and gross overbidding.



• Ebay reaches the widest possible audience, and is useful for selling inexpensive and medium-value single items, and low-grade collections or accumulations.Its main disadvantages are that it charges the seller an insertion fee whether a lot sells or not, and bidders don't tend to bid as much for individual high-value items as they would at a regular stamp auction, because they cannot physically inspect the lots. On the plus side, its total commissions (including Paypal fees) for lots that actually sell are considerably lower than those of regular stamp auctions, and payment is received much faster.
  


• Local Antique Auctions are the best venues for dumping worthless junk. They are often attended by bidders who know very little or nothing about the stamp market, and who will pay real money for stamps that seem impressive to them because the stamps are beautiful, old, or from "exotic" countries. I do not condone blatant dishonesty when writing descriptions for lots for sale at an antique auction, but I see nothing wrong with presenting them in an attractive manner. A common tactic for antique auction sellers is to create a stamp "mystery box," a box of all of the common stamps, recently received covers with interesting stamps attached, unwanted supplies, old auction catalogs, and other miscellaneous rubbish all thrown together in a lot for which the only true "mystery" is why anyone would want to bid on it. Antique auctioneers tend to charge a high seller's commission (usually 20%-25%), but they usually pay within 2 weeks after the auction. Local antique auctions are a great way to play the "ignorance market," converting garbage into real money which can then be re-invested in something of value. They are hit or miss opportunities, however, as sometimes sufficiently ignorant buyers do not show up to bid. Nevertheless, the risk is minimal or non-existent, given the quality of the material being unloaded.

Practical Advice: Auctions - Part I - Bidding and Buying

Stampselectors should view auctions both as opportunities to find bargains and as venues for selling (which will be discussed in a future article). This article will focus on bidding on and buying stamps at the four types of stamp auction: premier auctions, general U.S. and worldwide auctions, ebay and other Internet stamp auctions, and local antique auctions.

A few general rules apply when buying stamps at auction. Firstly, read the conditions of sale. Before bidding, it is important to know:

• the buyer's commission - this may be as little as 10%, or as high as 20% (or more); it is necessary to be aware of the buyer's commission when placing a bid because it is a part of the cost of the lot won;
  
• the costs of shipment, if you are not picking up lots - the shipment cost should be considered a part of the cost of the lot; note that certain auctioneers pad their invoices with very high "handling" charges in addition to the actual postage and insurance cost;
  
• the terms governing the return of misdescribed lots - these cover two matters of importance: a description of the kinds of lots that cannot be returned, and the duration of the return privilege. Many auctioneers specify that lots containing over a certain number of stamps, such as long sets of stamps or collections, cannot be returned. As for duration of the return privilege, most auctioneers allow bidders to return misdescribed lots within 10 days after receipt.

• the terms relating to expertization- almost all auctioneers grant an extension of the return privilege for the purpose of getting a stamp expertized. It is important to know how long this extension lasts, because experts can sometimes take up to 9 months to issue a certificate and send it back with the stamp. Some auctioneers will not grant such an extension if the auctioned stamp already bears a certificate that has been issued within the last 5 years. Others will grant an extension only if the extension is requested when bidding. Most auctioneers will refund both the cost of the stamp and the cost of expertization, up to a specified maximum amount, if the stamp receives a negative opinion from the expert. It is very important to know all of the expertization terms before placing a bid on any stamp which may require expertizing.

• additional fees, such as sales taxes or value added taxes;

Secondly, it is best to establish accounts with stamp auctioneers which allow for inspection of won lots prior to payment (if not attending the auction), and if possible, "net in 30 days" payment terms. When establishing such accounts, the auctioneer will request that you provide references, including society or organization membership information and dealer or auctioneer references. I am a firm believer in inspection prior to payment because, in my experience, even the best auction houses misdescribe lots 10% to 15% of the time, and the worst- 1/4 to 1/3 of the time. Such lots must be returned to the auctioneer via insured mail, and if a lot is grossly misdescribed, the auctioneer should be held accountable for postage and insurance costs, both ways. "Net in 30 days" payment terms is convenient because it allows the bidder time to resell the lot before he has paid for it.

Descriptions of stamps should be read carefully, noting any condition problems which are included. If condition problems are noted but trivialized, treat the trivialization sceptically, as the stamp's defect may not seem so trivial when you try to resell it. View all photos of lots, when available, as frequently photographed lots may not not be returned on the basis of problems which are visible in their photos.

Different strategic approaches apply to different types of auction.

Premier stamp auctions are conducted by the prestigious international stamp auction firms, and often feature many lots from prize-winning specialized collections formed by advanced collectors over a period of decades. Premier auctioneers always publish expensive, glossy auction catalogs, and the stamps displayed within them generally bring top dollar. Often, many of the lots are from collections consigned by just a few major consignors, with whom the auctioneer has had to make deals, including allowing reserved minimums and reduced seller's commissions, so as to bag the consignment. Such auctions usually have few outright bargains, because so many of the lots are "reserved to the hilt," but give the bidder the opportunity to purchase stamps which are rarely offered, and which may represent good investments.

General U.S. and Worldwide auctions present greater opportunities for bargains, especially in the areas of neglected foreign issues and large lots, such as collections and accumulations. As many of these auctions represent a large number of small consignors, fewer deals are made, and fewer lots have reserves. Often, the best bargains will be had by those who are willing to devote time and effort to inspecting the large lots, as most bidders are discouraged by the prospect of spending many hours rummaging through boxes.

Ebay and other Internet auctions have revolutionized the stamp market, and collectibles markets in general, in that they have brought together greater numbers of sellers and buyers than have ever been connected before. So many collectors, investors, and dealers have become adept at using Ebay that it is amazing to consider that it has only been around for about 15 years, and that before then, a collector who wished to buy or sell material usually had to go through a middleman who took a large cut for his services, such as a dealer or auctioneer, or else hope to find something at his local stamp club. Taking the classical Hobbesian perspective of free-market capitalism, I think it fair to say that ebay has waged a successful war of attrition against many of the traditional "mom and pop" operations, appropriating most of their customer base and driving those who could not adapt out of business.

When bidding on ebay lots, it is important to check the seller's feedback in order to ensure that he is reputable. The bidder should read all terms within the lot description, especially the return provisions and shipping costs. The seller should offer shipping terms which allow the option of insured mail, or registered mail if the seller is outside of the U.S.. These costs should be taken into account when bidding on a lot. Payments should be made via paypal, because it is convenient, and because it guarantees a refund in the event of a return of a misdescribed lot, or non-receipt of a lot sent via accountable (registered, insured, or certified) mail. I find that there are many bargains to be had on ebay, especially in items of "medium" value, which are too inexpensive to appear in major stamp auctions.

Local antique auctions are "hit and miss" situations, because usually when stamps are advertised for such auctions, they turn out to be junk. Much of the philatelic material that is offered at local antique auctions is either "limited edition" collections (described in an earlier article) and common worldwide stamps - either packet material or post-1940 U.S.. Occasionally, however, you may find a diamond among the mountains of coal, and will probably be able to buy it quite cheaply. The only thing of which one may be sure when attending a local antique auction is that the vast majority of bidders will be utterly ignorant of stamp values, and will therefore bid far too much or far too little.