Live Auctions

Interest in live and online auctions has increased greatly. With EBay and other online sites, auctions have become a business option for a lot of people. Live auctions as a result have also increased. As you may already be aware though, auctions are no stranger to frauds and scams.

Recently a friend of mine attended a live auction near his home. He found the experience exciting, but also realized some "shifty" things going on. He asked my opinion on the auction, showing me the stuff he purchased and the flyer. I found many red flags which I will discuss below as what to look for at live auctions.

First, how does a live auction work?

Here's how the typical live auction process works:

-Bidders must receive bidder cards from a cashier in order to make a bid on any item. In most cases a refundable cash deposit is required to receive a card.

-When the auction is about to begin, the auctioneer announces the terms of the sale so all bidders are aware of their responsibilities in bidding.

-When a bidder is ready to make a bid, they simply raise their hand or their bidder card and the auctioneer or ringmen acknowledges the bid.

-Phone and online bids are recognized by the phone person and these bids are considered the same as if the bidder were present.

-The ringman assists the auctioneer in spotting bids, holding up merchandise so the bidders can see the item for bid and marking the item with the bidder's number once it has been sold. Upon successful winning of the bid, the auctioneer tells the clerk what the bidder paid for the item and their bidder number.

-This information is recorded and given to the cashier who tabulates the bidder's purchases for check out from the sale.

-The bidder pays by either cash or cashier's check. In most cases, the bidder must remove their property from the auction location immediately following the sale.

So what type of scams can occur at a live auction?

-Most common is SHILLING. The sellers and their cohorts bidding the price of an item higher so that the winning buyer (you) ends up paying for the item at a higher price than you would otherwise have.

-The OLD SWITCHAROO. This is when the tag number on the item you bid on is switched to a damaged or less expensive item.

-KNOCK-OFFS/STOLEN. The scammers have products that are knock-offs of high-end name brands. There is also the chance that the items are real, but have been stolen.

-MISLEADING/UNTRUE DESCRIPTIONS. Anything can be written about anything. Sellers may fail to mention things they see as minor but you see as major faults. Does the description match the product? Is it a detailed description or just the make and model, sellers should give detailed descriptions and even point out faults, if you contact a seller before bidding and find that a lot of bad stuff has been left out of the description ask yourself if you want to do business with this person. Always make sure you are able to view the item.

-ORAL CONFUSION. Some scammers will use the fast-paced element of auctioneer speaking to confuse participants into bidding or accepting higher bids when it wasn't so. They rely on the fact the we can only remember so much in a fast, over-stimulated environment. So, the auctioneer can say the bidder said 300 when 200 was actually said, but since it goes by so fast, the next bidder can actually up the bid to 350 before the first bidder has time to complain or know what happened. The other scenario is the bidder "wins" at 300 when they said 200 but feel obliged to pay the 300 either due to not wanting to cause a scene and cause embarrassment or think they may have unknowingly said 300.

What can you look for in an auction?

*Before going to the auction, research the auction company/auctioneer through internet searches, Better Business Bureaus, Local and Federal police and word of mouth. Does the auctioneer or business have a business address, website, or phone number that you can contact them with?

*Most Auctioneers need to be licensed (depending where you live of course). So check for that.

*Know the value of the goods you are looking at. With new technology with smart phones, you can easily access the internet to do comparisons (this is how most pawn shops value your items nowadays).

*Know the terms and conditions of the auction before participating in the auction. Find out whether you could be on the hook for entry fees, prebid deposits, buyer's premiums (fees paid by the winning bidder), taxes, or shipping. You should also find out about return policies and warranties. Often auctioneers do not have return policies and warranties to back up purchases.

*Do not get caught up in the excitement of auction buying. Establish spending limits before the auction and stick to them.

*Save all the transaction information. Print or make note of the seller's identification, the item description and the time, date, and price you bid on the item. You should get a copy of the transaction from the auction. If you do not, something is wrong.