Auction Analysis

Is auctioning your valuable coins, currency, silver, gold, bullion and sterling flatware the right way to go?

Let us analyze auctions. While auctions in many instances bring the highest realizations, this does not equate to the highest returns for the seller.

Here's an example. Let's say you have a coin that has a strong retail value of $1,000. Buyers at auctions are in many instances comprised of a large percentage of dealers and sophisticated collectors. That's where experienced dealers go to replenish their inventories. If a coin can retail for $1,000, no one is going to pay more than market value. With buyer's, auction premiums ranging from 10-20%, one would have to bid $850 (at a 20% buyer's premium) to a maximum of $900 (at a 10% buyer's premium) to be in the ballpark of the targeted $1,000 value.

If a coin brings, say top dollar of $850-$900 hammer bid, there is then a 10-20% premium added as a buyer's fee. So, the realization is roughly $935 (with a 10% buyers premium) to $1,080 (with a 20% buyers premium).

Now, there is also a seller's commission based of the final hammer price (the highest price a buyer will bid prior to the buyer's fee) and not the final realization. The sellers commission can also be 10-20% of the hammer price so the seller realizes 10-20% less than the hammer bid of $850-$900. Do the math. The seller's actual realization is only $765 with an $850 hammer bid (assuming 10% seller commission) or only $720 with an $900 hammer bid (assuming a 20% seller commission). Is $720 to $765 really a high net return? Absolutely not.

Let's approximate the results: the auction realization was $1,080 and you received $720. That's a whopping over 33% less than the realization. That's 33% out of your pocket. Can you afford losing 33%? Of course not and if you agree, then auctioning is not the best route for you.

Let's look at that from a different perspective. $720 to $1,080 means you left about 50% on the table or $360. And, that's on just one item. Let's extrapolate that to your total consignment auction realization of perhaps $50,000 which means the hammer price was around $42,000 (assuming a 20% buyers fee) which netted you approximately $33,600 (20% sellers fee) to perhaps $37,800 (10% sellers fee). That's a net loss of $12,200 to $16,400 out of your pocket. Imagine if you have a $500k or million dollar realization. We'd rather not imagine that at all and neither should you.

No matter how you figure it, 10 or 20% commission and whether an $850 or $900 hammer bid, the seller is at the losing end of the deal. Yes, if your consignment is large enough the auction house may negotiate the sellers fee but one way or another, you're going to pay 5-10% sellers fee. Do the math in that scenario and you're still at a disadvantage.

The only one who is in a win win situation is the auction house. They can't lose no matter the turnout or any downturn in market conditions. You signed a contract.

If you're consigning to a localized auction, say in South Carolina, Georgia or Tenessee (actually anywhere in the USA) do you really think these platforms will bring out the strongest buyers? Of course not. Is a local auction firm that auctions farm equipment, used furniture, old nintendo games, used TV's and 1¢ baseball card boxes the right place for coins, currency, silver, gold, bullion and sterling flatware? We probably don't need to answer that question.

Some localized auction firms may also have a nationwide reach but that reach is limited. Localized auctions will not bring out the highest bidders because most localized auctions don't have the eye catching and rare items which bring in the highest bidders.

Some localized auctions may even have a web site, mailing lists and do advertising but they're not reaching the quality bidder that is required for coins, currency, silver, gold, bullion and sterling flatware. They do bring in realizations that are far less than specialized auctions and far less than strong, honest and ethical buyers can outrightly pay in full at the time of the sale such as Clemson Coins & Currency.

Therefore, these localized auctions have local bidders looking to buy at a discount in the hopes of reselling your valuable items to other dealers and/or collectors at sometimes huge profits. Granted, some bidders get caught up in the moment and overpay but smart bidders know when to stop and have their limits.

If you think the paperwork for a home mortgage is excessive and binding then you're in for a real treat with auction contracts. Basically, you're signing away all your rights to your valuables. You have no control or say what-so-ever once you sign the contract. Let's say you have a dispute, do you really have the upper hand and are you going to litigate it. The auction firm has far better lawyers than the average consignor and the contract you signed is not a favorable scenario for any disputes.

Auctions do a very thorough job at accepting consignments and all these terms are discussed at length prior to any contract signing. Once you sign, it's hasta la vista baby as you've given carte blanche to the auction firm to dispose and lot your items as they see fit. It's a contract and you signed it.

They may promise the world and unless it's spelled out in the contract, it is all meaningless.

While auctioning can in some instances bring out the highest buyers and set auction records, this is for rare, scarce and highly touted auctions. The average consignor will not have such rarities nor are all auction sales heavily advertised to bring out very advanced collectors.

Of course, there are many pro's to auctions if you discuss it with them. Some auction houses may provide you with a 'cash advance' which is a small fraction up to perhaps 50% of what they believe your holdings may realize. Some cash advances are charged with an interest rate as it's considered a loan until full settlement as final payout can be 30 days (with smaller firms) up to 60 days) with larger firms) after the auction closes. The entire consigning process from start to completion can be 30 to 180 days for final settlement (from consigning to final settlement) and sometimes longer with larger firms. The localized firms can probably settle quicker but are they providing you with maximum exposure in a specialized field? Probably not as their business model is for quick turnover.

When auctioning, there are no guarantees what-so-ever. Once you consign your valuables, you give up all your rights to your collection. The realizations are whatever they will be, good weather, bad weather, good attendance or not, internet outages and God only knows what other factors come into play.

Let's look at specialized and well known national numismatic auction firms and simply do the math and you come up with the same results. While your valuables are attaining national recognition among other consignments of coins, currency, silver, gold, bullion and sterling flatware, they're still getting a 10-20% buyers premium of which you receive zero compensation for. And then, there is still a sellers fee of anywhere from 10-20%. OK, perhaps you can negotiate it down to 5% (if you have a $250k consignment or more), you're still not achieving top dollar, the auction house is. The auction house is in a win win situation for themselves no matter how you slice it up.

Unreserved consignments sell for whatever the marketplace will bear. This is how most consignments are accepted.

A reserve is a feel good approach to auctioning your valuables. You give your valuables to the auction with the agreement that they will sell your items at a preset 'reserve' that you set. Sounds good, right? It's the kiss of death.

Reputable auction houses disclose if there is a reserve on any item(s). Most times, consignor reserves are grandiose ideas of what they believe their valuables should sell for. Moreover, in many instances these items receive little to no action as astute buyers refuse to waste time with reserved lots. That's just how it is and this is very true folks.

Most reserved lots don't sell. So now, you've tied up your valuables for perhaps months which didn't produce 100% in sales and you get your non sold items back to do it all over again or to sell on your own.

The auction house will do and say whatever you want to have the opportunity to auction your items as their cost to adding 1 or 100 items is negligible. In fact, some auctions may even charge what is called a 'lotting fee' where you pay for them to include your items in their auctions. It's a no win situation and an attempt at futility.

Another item to consider is how the auction company going to offer your valuables. Will they break each item down and offer single items or group your collection into bulk lots? This is key to bringing in the highest possible price for the local auction. It's in the auctions best interest to offer single items and bring higher realizations whereby netting the auction higher returns as well as the consignor. However, this is not always possible due to time constraints such as receiving your collection in a short time from to the actual auction.

The auction firm may also require higher lot realizations where each lot must bring say $100 or more (considerably higher with national auctions) for them to be worthwhile. That's when they offer bulk lots by grouping your valuables in larger lots which not all bidders will be interested in whereby diminishing your net return. They do this for ease of lotting and accomplishing their fulfillment to you and your contract with them.

Auctions offer the marketplace an invaluable method of acquiring material but it certainly is not the best method to dispose of an inheritance or sell off parts of one's own collection.

Well, to be perfectly honest they do serve a purpose for lawyers who have to settle estates and just want to obtain closure for the family. Other reasons are for bankruptcy proceedings and divorce settlements. The reasons are for strict accounting where everyone wants an arms length deal which protects all parties such as family members, lawyers and as the courts require. Unless you're incapacitated there is really no good reason to consign your valuables to an auction. Afterall, who knows your collection and its value better than you? If this is an inheritance and you want to settle for up to 30% less than marketplace value, then an auction may be for you.

We would never cosign our valuable inventory and collection to any auction firm as we're fully capable of selling at top dollar on our own. Not everyone has this advantage but you do when choosing Clemson Coins & Currency. We offer the highest prices as we have a nationwide reach to the largest and highest buyers both collectors and dealers. This comes from over 50 years experience buying and selling rare coins, currency, silver, gold, bullion and sterling flatware. We have the resources to hold out for top dollar and can therefore pay you more, always!