Going Once, Twice, Sold

December 16, 2011 10:11 PM
Going Once, Twice, Sold

Online auctions provide access to bargains from around the country

The next time you attend a farm equipment auction, land auction or livestock auction, you might be bidding against someone thousands of miles away.

Or, if you’re one of the tens of thousands of folks who now participate in auctions via the Internet, you might be sitting at your kitchen table in your stocking feet, sipping coffee as you bid on items at an auction in a different time zone.

The Internet has revolutionized the auction business. Companies such as Proxibid and BidSpotter team with local auction companies to provide nationwide, even worldwide, audiences for neighborhood auctions.

"There are two basic types of online auctions," says Joe Petsick, chief financial officer for Proxibid. "The most common is where a live auction run by a local auction company is simulcast over the Internet. Bidders watching their computer screen can see, hear and participate in the auction almost like they’re sitting or standing in the front row.

"A second option is a timed auction that’s strictly online," Petsick says. "It’s similar to eBay in that people view an online catalog of items to be auctioned, then make bids at a predetermined time. The way we do our timed auctions, the bidding closes on an item after there have been no bids during a five-minute period. We call it a ‘soft landing’—the bidding stops when the bidding is done, not when a time limit has been reached."

Money matters. Matt Maring, with Maring Auction Company, Kenyon, Minn., simulcasts many of his agricultural auctions. "[Simulcast auctions] give sellers access to a much larger audience," he says. "It helps buyers by reducing their need to travel to an auction and stand around for a couple hours, waiting on a single item to sell."

Simulcast auctions often gross more profits than conventional auctions. Maring cites instances where online bidding drove prices as much as 25% higher after local bidders standing at the auction had dropped out.

He can document online activity at his auctions because Proxibid tracks the activity of online bidding and reports the results to local auction companies. The reports document how online bidding influenced the final sale price of each item, the percentage of items purchased by online bidders and the percentage of bids that were driven by online bidding.

"We’ve found that 10% to 15% of items at a [simulcast] auction are sold to online bidders," Maring says. "Another 35% to 50% of the sales are price-driven by online bidding."

That might make it sound like online auctions benefit only sellers, but buyers often find bargains online. Farmers in the market for a moldboard plow have learned that Internet auctions are prime places to locate used moldboard units in good condition selling for near scrap-iron prices in other states. Petsick notes that the market for four-wheel-drive tractors has found a nationwide equilibrium, largely due to buyers who use the Internet to leap across time zones to find bargains.

A buyer in Canada used a simulcast auction to scoop up self-loading bale wagons that were going for bargain-basement prices in the Midwest, Maring adds.

Both large and small auctions can benefit from Internet participation. Maring’s company held a retirement auction this past summer that featured a large line of late-model farm equipment. The auction grossed $2.8 million. One tractor purchased by an Internet buyer two states away sold for $45,000 higher after local bidders at the auction bowed out.

"I’ve also done a lot of $100,000 auctions where a $10,000 tractor in good condition sold for top dollar because Internet bidders recognized the value and were willing to bid up the final price," Maring says.

"I’m to the point where I recommend a combination auction if a farm auction has anything that’s halfway marketable," Maring explains. "Simulcasting a live auction on the Internet offers the best of both worlds to buyers and sellers."

The Basics of Online Auctions

Arranging to buy or sell in an auction simulcast on the Internet is straightforward, once the auction’s manager decides simulcasting is the best option.

"[Internet auctions] are good for certain types of auctions but not for every auction," says Tonya DeCamp, office manager of Daugherty Auction and Real Estate Services Inc., Adel, Iowa. "We haven’t seen any great benefit for normal household auctions or average estate sales. The local auction company will know if what you have to sell would benefit from being on the Internet."

If the auction is deemed Internet-worthy, it takes extra time and effort for the auction company to not only make arrangements to put the auction online, but to ensure that potential bidders have all their questions answered.

"It’s extra work, but it’s part of our job to give the customer the best possible return for his money," says Matt Maring of Maring Auction Company, Kenyon, Minn. "The auction company needs to post lots of photos of all the items with detailed descriptions. We spend a lot of time putting information on the Internet so there will be no hiccups, no misunderstandings, after the sale is over and the buyer arrives to pick up his purchase."

Viewing online photos and descriptions is only one option available to interested buyers. "I’ve helped potential bidders arrange to have a mechanic go out, inspect the machine and give a neutral opinion on its mechanical condition," Maring says. "The local auction company should do whatever is necessary to make bidders comfortable so they know everything they need to make a good decision."

Participation requirements.
Prospective bidders must register online prior to an online auction. Some potential bidders balk because part of the procedure to establish online bidding rights involves supplying credit card numbers and other personal information.

"We’ve never had problems with anyone getting personal information stolen from online auctions," Maring says. "All the online [auction] services have very secure web pages. But I get occasional calls from people who aren’t comfortable giving personal information over the Internet, so we work out alternate ways to get them involved in bidding. We get permission to talk to their banker, get references and arrange ways for them to buy without using credit cards."

Additional costs related to setting up Internet access to a live auction or an online-only auction come in the form of an initial setup fee ($300 to $500) generally paid by the seller, as well as a 2% fee that is added to the "hammer price" and paid by the buyer.

"That can be a significant additional cost when buying a big tractor or combine," says Joe Petsick, chief financial officer of Proxibid, "but in many cases it saves the cost of traveling hundreds of miles and being away from the farm for a day or more. The exact details of commissions and fees for each sale are detailed on our website, so everybody knows up front what their expenses will be."

A final necessity for participating in an online auction is a reliable Internet connection. Even with a dial-up connection, bidders can bid in real time, though they might not have access to the live audio and video streams, Petsick says.

"Contact the local company that is running the auction, explain your situation and they can usually come up with a way so you can participate in the auction," Petsick says. "We can do some Internet magic and arrange for folks with dial-up Internet connections to be able to participate in real-time bidding."

"The big thing, if you’re interested in participating in an online auction, is to plan ahead," Maring says. "Study the photos and read all of their descriptions, make phone calls to get all of your questions answered, then make arrangements for payment if you make successful bids."

After that, it’s just like being at the auction—though you won’t be able to buy coffee and sandwiches from the local church ladies.

Anonymous Bidding

An entertaining aspect of attending a live auction is watching bidders avoid attention as they offer their bids. Some bidders are masters at using a lifted eyebrow, a twitch of the index finger or an oh-so-subtle nod to make bid-taking ringmen yelp with joy.

Modern auctions simulcast on the Internet have let bidders take the art of subtle bidding to a new level.

"A lot of bidders tell us they like the opportunity to be anonymous at auctions," says Joe Petsick of Proxibid. "They are obviously known to the auction company holding the auction and to the company providing the Internet service because they have to preregister and provide payment information, but the rest of the crowd only hears the bidder number and has no idea who is bidding.

"Some folks find that aspect of Internet auctions very advantageous," Petsick says. "We’ve heard of instances where people only a mile or two from the actual auction made their purchases via the Internet to avoid hard feelings or conflict with neighbors or other people at the auction."

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