Has the reserve confirmation system decreased the seller pool?


Mike Brandly
4 October 2017 - 6:34pm

“Has the reserve confirmation system caused the industry to lose buyer confidence and thus decreased the buyer pool?”

Justin Ochs asked the above question six years ago, and we answer his question here: https://mikebrandlyauctioneer.wordpress.com/2011/10/30/has-the-reserve-confirmation-system-decreased-the-buyer-pool/

Today, we ask “Has the reserve confirmation system (or any reserve auction particularly when property doesn’t sell) caused the industry to lose seller confidence and thus, decreased the seller pool?”  In other words, even when an auctioneer charges a “no-sale” fee or is compensated otherwise, do we as auctioneers lose future sellers when we don’t sell property?

Here’s the answer: “Yes.” When we as auctioneers conduct auctions and don’t sell property, future sellers see this as evidence that #AuctionsDon’tWork — in deference to the social media #AuctionsWork campaign. If we as auctioneers want more sellers, we have to start selling property, and not not-selling property.

A “with reserve” auction inclusive of minimum bids, published reserves, unpublished reserves, seller bidding and the like — protects the current seller against a disaster where — for example — a prized (thought to be) $5,000 painting only demands $600 at auction; in "with reserve" auctions, of course, the auctioneer/seller can void this transaction and he can keep his $600 (likely not $5,000?) painting.

However, what do sellers see here? They might see a $5,000 painting and a seller saying he doesn’t want to sell it for only $600. Further, they tend to think that they probably don’t want to sell any of their property at auction either as this subject auction didn’t result in a sale. Worse, the bidding gets up to $600 and then suddenly there was a no-sale … without any explanation. Generally, less disclosure equals less confidence in the system.

Many auctioneers all across the United States conduct with reserve auctions, and charge their sellers no-sale fees so they are compensated in the event the property doesn’t sell. However, does this result in these same auctioneers (and even other auctioneers) getting less compensation down the road with fewer sellers? I suspect so. Further, and maybe even more importantly, did the property not sell because it was a with reserve auction?

We previously wrote about the power of the word “absolute” (https://mikebrandlyauctioneer.wordpress.com/2016/08/25/the-power-of-the-word-absolute/) and relatedly the benefit to the seller. It would seem selling without reserve certainly attracts more bidders, and thus, more likely results in a market value sale, thus, demonstrating to other potential sellers the power of auctions and that #AuctionsWork.

Lastly, do all absolute auctions show that auctions work? We, as auctioneers, have to be careful here too, as marketing for these auctions has to be robust in order to maximize prices. While the fact that “everything is selling” is a powerful message, there is far more involved in comprehensive auction marketing.