The Auction Ring
Updated: Oct 15, 2019
Have you ever heard of the #auction ring, do you understand how it works and why the seller loses?
It is illegal but I have seen it in action many times . It sounds like a work of Sunday evening TV fiction but believe me when I say it has been going on for years.
It is a rainy Tuesday morning and Fat Dave, Barry, Michael, Julie and Brenda are chatting by the coffee machine at Willowbridge auctioneers, they are antique dealers and the coffee is free.
The sale room is packed with dealers of varying levels and a cluster of private buyers who have watched too much “Bargain Hunt”, the Wi-fi is close to overload with the amount of #Googling taking place.
Fat Dave and the others move to a back room where one of the has spied lot 284, what looks to be an original 18th century Wake table, doing their best not to look too closely they convince themselves that it is “right”, probably worth £4000.00 to them and it is worth risking £3300.00, there is of course 18% auctioneers commission to pay. Incidentally 18% buyers commission is at the lower end of the scale, some auction houses are now charging 28%, careful how you bid!
They all leave the auction apart from Julie, she is given the job to bid as she is new to the area and should not raise suspicion with the auctioneer. Lot 284 comes up with a starting bid of £1000.00 – no bids, the auctioneer lowers the price to £500.00, Jane bids, a London dealer then bids £600.00, jane then scares him with a bid of £1200.00, he runs to £1300.00 and Jane caps his bid with £1500.00.
The auctioneer is not at all happy, he knows the table is worth around £4000.00 and no local dealers seem to be bidding, he holds out for a long thirty seconds, there is no more interest and reluctantly the hammer goes down at £1500.00. Jane shows her paddle number and leaves the auction room.
It is now Thursday, still raining and Fat Dave, Barry, Michael, Julie and Brenda are sat in The Plough, a quaint thatched pub running down to the river. They are in the games room, alone.
The cost of the table with commission is £1770.00 (we will forget about VAT for this example) and the five each put in £354.00 so they now all own it. Michael is quite keen to have the table and bids £2000.00. Barry has a customer for it and bids £2100.00, Brenda goes £2150.00, Jane bids £2200.00 and Fat Dave backs out.
Fat Dave now collects his profit due which is a fifth (there are five in the ring) of the difference between the cost £1770.00 and £2200.00 the highest ring bid which is £86 plus his £354.00 original payment.
The bidding now goes on Jane pulls out at £2300.00 and receives £132.50 (a quarter of the
difference as there are now four in the ring). Barry eventually wins the auction buying the table for £2700.00, the other two getting £310.00 each plus their original £354.00 purchase cost.
Barry is well chuffed as he has a table worth £3300.00 + commission to him for just £2700.00 a saving of £1194.00, the others are happy as they have made a few quid on the side.
The ring is a gamble for the dealers but an unfair one with the vendor losing at least £2500.00.
Not at all good and yes this really does happen, just another pitfall of selling at auction.