No Reserve?

[syl]

I've been looking for a vehicle to buy on ebay motors and have seen several ads that say 'no reserve' but have a minimum starting bid. Thats not no reserve. Whats up with that?

[talesofthesevenseas]

The difference is that you know the amount with a sytarting bid.

[waywardangler]

The minimum bid is the least amount the seller will take.  A reserve would be a hidden (usually) amount the seller would take.  If only one bid is submitted at the minimum, the seller is obligated to sell the car.

[hosman321]

Don't worry syl, I never understood that concept either.  To me, a reserve is the minimum amount a seller will accept. If they start the auction at $500.00, then isn't that really a reserve? I know, I know...there may be a difference. I just don't get it.

[waywardangler]

To me, a reserve is a minimum amount a seller will accept. If they start the auction at $500.00, then isn't that really a reserve?

So, hosman, that would mean every auction on eBay is a reserve auction because there is a minimum starting bid on every auction. And every live auction also starts somewhere, so that would mean all auctions are reserve auctions?

No reserve means there is no hidden price that if it isn't reached the item will not sell. A reserve set at $5,000 and the auction starts at $.99, means the item will not sell unless it makes the $5,000 reserve price.  No reserve, with a starting price of $500 will sell if a bid of $500 is submitted.  No reserve, with a starting price of $.99 will sell if a bid of $.99 is submitted.  A seller, selling a car with a minimum selling price or opening bid, will sell the car for that price if only one bid is submitted.  The seller is hoping for more bids higher than the minimum bid.  A reserve is not the minimum bid amount but you may construe it as the minimum the seller would accept, so you can call it a reserve if you wish.  If you call that a reserve auction, then all of your auctions would have been reserve auctions also, regardless of the starting price.

[hosman321]

That is all true wayward, I guess I just don't understand the purpose of a reserve. If a seller is not willing to accept less than AMOUNT A, then why not just start the bids at AMOUNT A? Why in the world would you waste people's time with some "hidden" amount? If you are selling a sofa at auction and will not accept less than $200, then start the bids at $200. I don't know, I just think it is rude to have some hidden amount and get people excited about bidding, only for them to find out they didn't bid high enough. When I am on ebay and I bid on an item and it says, "Reserve not met, enter higer amount" I don't even bid again, I move on to another listing.

[waywardangler]

Starting at a lower amount supposedly generates interest amoung (amongst?) bidders.  A reserve protects the sellers investment from letting an item go too cheap.  Reserves are generally used on high ticket items selling for thousands.  It is not wise to use a reserve on a low price item such as the sofa example for $200.  You could use a BIN or fixed price. 

Reserves are not good for auctioneers because they expend time and money on an item and if it doesn't meet the reserve, they have all that wasted and do not receive a commission.  I think some ebay sellers used to use reserves just to get a "free" appraisal on an item by setting the reserve so high no one would reach it.  Ebay kind of corrected that by increasing fees on reserves based on the reserve price.

At a live auction, many times the auctioneer will throw out the initial price which is actually what he/she hopes the item will sell for.  The starting bid is much lower and usually reaches the initial called out price or even higher.

I do not like reserves either and move on when I see them.

[talesofthesevenseas]

I think it has to do with encouraging or discouraging bidders. I think some people feel that if they set a starting bid to high it is too discouraging and it scares of the bidders. They think that if there is a reserve that people will attempt a bid. However there is the other frame of thought that reserves are almost always "wishful thinking" and set too high. I know that I rarely bid on a reserve auction unless it is for something really special. I find that I will usually write off any item with a reserve as being set to high, because most often the seller believes it to be more valuable than it is.

[syl]

All good points but there are some true 'no reserve' auctions on ebay with no minimum bid. Well, maybe 99 cents. But there are some that say 'no reserve' and then have a minimum bid of $500, $5000 or whatever. That isn't 'no reserve'.

[waywardangler]

I disagree, syl.  The price an item starts at is immaterial to whether or not it is a reserve auction.  Whether or not the item sells at its' final price determines if it is a reserve auction.

A reserve used in auctions is a hidden price higher than the starting price.  That reserve must be met before the item will be sold.  It is not the price an item starts at.  read eBay's explanations here http://pages.ebay.com/help/sell/reserve.html

In a live auction, an auctioneer does not have to accept any starting bid or any incremental bid from the crowd.  They can ignore your bid and pass the item or they can ignore your incremental bid and sell it for the last bid they called and accepted.  On ebay, the seller is acting as the auctioneer by setting a starting bid and the seller also has to accept ebay's incremental bid ranges.  A bidder cannot circumvent eBay's incremental bid ranges and come up with some inbetween bid.

[talesofthesevenseas]

That was a good explanation Wayward, I didn't quite understand it that way before. Thanks!

[mariok54]

Well put Wayward

All good points but there are some true 'no reserve' auctions on ebay with no minimum bid. Well, maybe 99 cents. But there are some that say 'no reserve' and then have a minimum bid of $500, $5000 or whatever. That isn't 'no reserve'.

There is really no difference between a 'starting' bid of 99cents or one of $500, and neither are 'reserves' as such because they are there for all to see.

Reserves can work in favour of the seller or the buyer. I sell a chair at Auction which is estimated at £500 - £700, but want to protect it, so the Auction House puts a reserve on of £480. Because of this the Auctioneer may start at the lowest estimate (time is money), if there are no bidders they may then go down, and then maybe take a very low bid of £250. With any subsequent bidding it may or may not reach the reserve, so may or may not be sold, or sold just on the Reserve. Without a reserve the Auctioneer could start at a mere £100, which could excite a few bidders (probably more than starting at the lowest reserve. Again, it may or may not reach the lower estimate price, but it has probably generated a lot of interest, and may exceed the lower estimate because of the interest generated.

The same psychology probably applies on Ebay. A high starting price may dissuade a lot of potential bidders, but having a $4.99 starting price but with a reserve of say $400 will generate interest, purely as people don't know what the reserve is. This protects the seller from letting their item go for a mere $4.99.
However, a no reserve is probably a safe bet but only if you know that there is a demand for what you have to sell. Again, with a low start you will attract a lot of interest.As with the example of the chair, I may have a starting price of £500 with no reserve, but the high starting price puts off bidders, I get one bid of £500 and I have to sell it.With a lower starting price I might have several bidders competing and it could end up exceeding the lowest estimate.

For every argument I've put forward, there's probably numerous counter-arguments, that's the psychology of auctions  

[syl]

Well the way I've always understood it is a reserve is the lowest price a seller will accept. So in a 'no reserve' auction the seller is obligated to sell at the highest bid, no matter what it is. I have sold items at auction with a reserve price and sometimes they sell, sometimes they don't but if I tell the auctioneer there is no reserve, then he would sell it at whatever the highest bid is. He might set a starting bid based on his estimate of the value but it could sell for less than that. But on ebay if you set a minimum bid that IS the reserve because you can't bid less than that, therefore it can't be a 'no reserve' auction.

[waywardangler]

I have been doing some research on this since there are a lot of misconceptions (including mine) on 'reserve' and 'no reserve' so I went to Maine Antique Digest and read some articles by Steve Proffitt.

"An auction without reserve (also known as an absolute auction) is one where the highest bidder takes the lot regardless of the amount of the bid."  "An auction without reserve has no minimum bid level by definition."   http://maineantiquedigest.com/articles_archive/articles/ethi1000.htm

"What does "with reserve" mean? It means that the seller has the right to designate an undisclosed price below which he will not sell any given lot (i.e., an individual piece exposed to bidding) in the auction."   "What does "without reserve" mean? "Without reserve" means that the item up for bid will be sold to the highest bidder, regardless of the amount of the high bid."  http://maineantiquedigest.com/articles_archive/articles/ethi0600.htm


Here are the seven basic rules that control absolute auctions. (aka without reserve)
First, the decision to sell at absolute auction is always the seller's. Auctioneers are mere agents working for sellers, and they do not control this decision.
Second, the auctioneer must specifically announce to the bidders that an auction of personal property or goods is unreserved (absolute). Otherwise the auction carries the protection of a reserve auction.
Third, once the auctioneer has opened the bidding on a lot, it cannot be withdrawn unless no bid is made for the lot within a reasonable time.
Fourth, the seller (not the bidder) makes the offer to contract. The courts have held that an absolute auction is by definition a continuing offer by the seller to sell to the highest bidder.
Fifth, a bidder accepts the seller's offer to sell by bidding. Each bid forms a contract for sale that is subject to being upset only by a higher bid made while the bidding remains open. The auctioneer may not reject any bid. This is why bidders are in control of absolute auctions.
Sixth, neither the seller nor the seller's agent may bid.
Seventh, the lot will sell to the highest bidder regardless of price—period! This rule underscores the substantial risk of sacrifice that an absolute auction carries. http://maineantiquedigest.com/articles_archive/articles/feb05/ethics0205.htm

Steve Proffitt is a Virginia attorney-at-law, auctioneer, and an instructor at Reppert School of Auctioneering.

[syl]

Very well put Wayward. I think you just confirmed what I've been trying to say. If, on ebay, there is a minimum bid placed on an item, then it can't be called 'no reserve' because on ebay you can't bid less than the minimum bid. I just think it's wrong to say no reserve and then put a minimun bid on the item.