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Margarita Spivak

What Are Auctions and Should You Go to One?

Margarita Spivak

February 25th, 2019 | Written by

What are auctionsAlex Cooper is an auction house located in Towson, MD. The family business began in 1924 when a young Alex Cooper started the business to sell real estate, antiques and fine art. Over the past 95 years, Alex Cooper Auctions has stayed a family business, providing unique art, antiques, furniture, and real estate to shoppers, dealers, and collectors in the Mid- Atlantic region.

What are auctionsI sat down with Samantha Minshull, an Appraiser and Auction Coordinator at Alex Cooper, to ask her some questions about auctions, and the wondrous pieces that come across her desk every day. Samantha originally started her career in the Museum of Fine Arts in Boston. It wasn’t long until the excitement of auctions captivated her interest. Since then, she has worked at Skinner Inc. Auctions in Boston and has recently moved to Baltimore to launch her career at Alex Cooper.

 

How does an auction work?

Auctions are really quite simple and very exciting. On our website, we publish all our auctions and their lots (a “lot” is typically one item or a set of items that are auctioned off together). The lots typically come with estimates – which is where I come in. It’s typically a range that is the amount we expect the item to sell for. At Alex Cooper, bidding will always start at half of the low estimate.

 Prospective buyers have four ways to bid in an auction. There’s live bidding, absentee bidding, online bidding and phone bidding.

Live bidding is when you walk in, register, get a paddle, sit in the auction room and bid in person. This is typically what people expect of an auction. Absentee bidding is when a buyer reviews the lots in advance and calls us to set his or her maximum price on the lots that he or she is interested in. Absentee bidding is interesting because the auctioneer has all the absentee bids at the podium, and he will bid against live bidders on the behalf of absentee bidders.

There is also online bidding and phone bidding. There are employees in the live auction room on the phones and computers who will bid on behalf of online and phone bidders.

All of these ways to bid helps us increase bids and creates a fast-paced and exciting atmosphere.

What kind of things are sold at auction?

What are auctions and should you go to one?Everything from estate jewelry, fine art, vintage furniture, real estate, even rare wine (Alex Cooper does not have a liquor license and we do not auction wine). 

Right now, we have a vintage phone booth coming out for auction. Working here you really discover there’s a buyer out there for just about everything.

How do you authenticate your pieces?

There are processes in place to ensure authentication. We enlist the services of skilled individuals that study and research original art and know if it’s real or not. Take for example Auguste Rodin, the French sculptor. He made many bronze sculptures that got cast. The experts know that the first casting has a specific mark, or scratch and can recognize it. They spend all their time researching these things.

Who goes to auctions? Can anyone go to an auction?

Most people at an auction are dealers, collectors, retailers and interior designers. Many of them turn around and add their premium on the items and re-sell them. Since anyone can go, you can often find a great deal at an auction. It’s almost a hidden secret because some of the deals are truly spectacular. For example, at our January 2019 jewelry auction, we sold a 2-carat solitaire engagement ring for $6,000 and a vintage Tiffany & Co. Tank watch for $175.

Do you have any advice for first time buyers?

Absolutely – regardless of how you plan to bid, set your price in advance and stick to it. It’s very easy to have your heart set on an original Henry VIII half penny and then get carried away with the price once bidding starts. The excitement and fast-pace of an auction can really lead people to over-bid.

 Just like you see in the movies, auctioneers try to go as fast as they can. This is for 2 reasons – 1. They want the sale to go by faster because the auctioneer has hundreds of lots that they want to get through. 2. It’s also a psychological thing. They create an urgency and compel bidders to act quickly – which helps drive prices up.

For first-timers and seasoned auction buyers, a good strategy is often to wait until the bidding is winding down and then jump in. This is a good tactic because if you bid very early on, you will drive the price up.

What happens if something doesn’t sell?

Like I said, there’s a buyer for almost everything. If something doesn’t sell right away, it could be because the estimate is too high or too low. The longer you are in the auction business, the better you get at estimating. If something doesn’t sell, we can either offer the item again, ask the seller to lower their reserve, take the item back, or donate it.

From an economics perspective, it’s all supply and demand. For example, when the 2008 recession hit, we had an influx of every type of item you could imagine. While we only try to take items that we think will sell, there just simply wasn’t a market for many things during the recession. People were off-loading their goods, not buying new goods.

There are also some general rules of thumb for pieces that don’t appraise or sell as well as others. For example, furniture, especially upholstered furniture and big chunky wood furniture – It’s simply out of style. Even if a seller purchased it years ago at a high price, it doesn’t mean it has retained value or appreciated. Most likely it has lost value, just like a car. Another peculiar item that typically doesn’t appraise well is art paintings in a brown color palate. While colorful pieces typically do very well, brown colors are not hot in the market right now.  It’s all very interesting. For example, back to our phone booth, I’ve never seen an unsold phone booth – there are always buyers for them!

How do you know how much to estimate for any given piece?

When we take an item in, we give the item an estimate range of what we think it will achieve at auction. We also provide appraisals, formal documents for non-auction purposes, such as insurance.

For auctions, we look for a Fair Market Value. The IRS defines the Fair Market Value as the agreed upon price between a willing and unpressured buyer and a willing and unpressured seller. To find that value takes a lot of research, price comparisons, evaluating the condition of the piece, and the desirability of a piece. Some people attribute more value to the things they own or have emotional attachment to, but that doesn’t translate to real value.

The key here is ethical estimating. Personally, I took a course on this subject. We do not estimate based on what the seller wants to get for their piece or based on their emotional attachment to the piece. Nor, do we provide higher estimates simply to drive the price of a piece up.

Sellers, however, can ask for a reserve, which is an amount under which the seller won’t go. The reserve can’t be higher than the low estimate. In some states, like New York, an auctioneer must disclose if the seller has a reserve on the piece. In Maryland it can be kept a secret. This is important because a public reserve can impact the bidding and influence the hammer price (the price of the highest bid when the auctioneer says “SOLD”) essentially driving the price down.  If people in the audience know the reserve is $1000, they may hold off on bidding until the auctioneer starts dropping the price.

Tell me more about appraisals for non-auction reasons.

There are two types of appraisals – fair market value or replacement value. As I mentioned earlier, people often get things appraised for insurance reasons, in divorce, or for estate reasons.

For insurance, you typically need replacement value. Your insurance company will tell you how often you should get things appraised and re-appraised. Also, if the market has changed drastically you may want to get your pieces re-appraised. So, if something were to happen to your pieces, you wouldn’t have any issues getting paid what they’re worth or having them replaced with something comparable.

In divorce, a couple is splitting up their estate and sometimes their valuables are in dispute. They may need to know how much their items are worth so they can be split in accordance with their divorce agreement. For this we provide fair market value appraisals.

For estates, if you’re in probate and you need to pay taxes on an estate then you need the tangible property declared. For this we give a fair market value estimate.

Lastly people also get donations appraised. Legally the IRS requires an appraisal for donations over $5,000.

How do auction houses make money?

When we take an item, it is because we think it will sell. However sometimes, we will accept an entire estate which will include some great, easily marketable items, and some items that may be tough to sell.

Since auction houses don’t own the items they sell, they make money by taking a percentage of the sale. There is a buyer’s and seller’s premium that ranges depending on the hammer price. More expensive pieces have the lowest premiums and less expensive pieces take a higher premium.

There are exceptions. For example, in real estate we only make money from the buyer’s premium which is typically about 5%.

Are there any great auctions coming up?

What are auctions and should you go to one?Of course! We have a fine jewelry, sterling silver and coin auction coming up on February 26th, It will feature Tiffany & Co. engagement rings, vintage Breitling and Bvlgari watches, art deco and Victorian jewelry and much more. Also, on February 28th we have a fine rugs, decorative arts, paintings and furniture auction. As we get closer to these auctions, we will have the lots listed on our website, so feel free to take a look!

 

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This information is not intended to be used as the only bases for investment decisions, nor should it be constructed as advice designed to meet your particular needs. You are advised to seek the advice of your financial advisor prior to making any decision based on any specific information contained herein.
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