Auction Reserves - let’s discuss
 

A few days ago I (sort of) posted about the SGC 7, 1952 Topps Mantle ending in Heritage tmrw night. As of the date I posted, the hammer on that card was $260k, with an all-in price of $312k with buyers premium. IF the auction ended there, at $312k (and there was 4-5 days left), it would be a substantial increase over a comparable Mantle that most recently sold for $264k. HOWEVER, two days ago a reserve gets posted, currently at $280k before BP. I bet nobody bids and the seller, who almost certainly got a piece of the buyer’s premium, misses out on a solid sale.

In the same auction, there is a super rare, twice signed, 1893 Cy Young Cabinet. It sold in 2018 for $60k. It was auctioned in 2022 but did not hit its $240k reserve (with BP). It was at about $110k with BP a few days ago when a $200k reserve ($240k with BP) popped up. I highly doubt it sells now with that reserve in place, but I promise it would have been bid up bc I had every expectation of going after it a few more times. If it doesn’t sell, Seller misses out on at least 200% profit in 5 years.

One last thing to consider - Heritage makes the consignor pay the BP on all amounts that do not meet their reserve. So, even if the consignors are getting 50% of the BP on the Mantle and Young, they will fork over $20k+ likely to watch their item not sell; this is the second time the Young consignor will suffer that fate. Please note, this is not about Heritage - almost all AH’s will offer reserves and I expect most take a BP even if the item does not sell; it’s just that these examples are in the current Heritage auction.

I understand the attraction of a reserve for the consignor, and I have often considered one when I consign. But then I recall a story by one AH owner who recounts when he tried to convince the consignor not to put a reserve on a lot, the card did not sell at the reserve, the consignor was mad so the AH purchased the card for the reserve amount, the AH then put the same card in its next auction without reserve and it closed well above the reserve amount.

As a bidder, I don’t like a reserve and I rarely go hard after items with a reserve. As a consignor, I have never put a reserve; some items have beat expectations and others have disappointed, but I had resigned to selling the item when I consigned it so I never wished I had put a reserve in the disappointments.

Let’s talk about reserves, as a bidder, consignor, auction house….

Do we know for certain that Heritage is actually charging the consignor the BP when reserve items don't sell, as opposed to simply reserving the right to do so?

As I posted in your original threat on the Mantle, at first Heritage actually posted a reserve of 320, and only revised it down to 280 last night.

I don’t know in this specific case. But I know people who have been charged by Heritage the BP on reserve lots that did not sell. My gut is that it’s intended partly as a disincentive to put a reserve. I have no issue with the practice - the AH did its end of the bargain and should he paid. As with everything, I bet it’s all fluid and negotiable; the mantle reserve has already been dropped $40k.

I’m surprised to hear HA agrees to a reserve (maybe for items expected to exceed a certain level?) My understanding was they would not support this and instead set the opening bid at a fraction of the expected hammer price. This enables buyers to get into the game and enjoy a vigorous auction process. The points of unsold items with set reserves seems to substantiate this position.

Tough question
 

1) I know for a fact that when a reserve is set, it does not automatically mean the consignor pays if the item doesn't sell - just another potential point of negotiation.

2) As a bidder I am generally dissuaded by reserves and have "moved past" some items with them. I believe when reserves are set too high (like in the case of the Young you mentioned) it hurts the item and potential sale. It almost becomes a "make me sell it" price, rather than a "what the market will bear" auction.

3) As a consignor (I admittedly consign very little), I understand the temptation in some cases to ask for a reserve and have done it a couple of times. While the items did sell, I was not really happy with the outcomes. More times I have sold without reserve and outside of a single instance of gross mishandling of an item by an auction house, have not been disappointed. I think the largest risk of no reserve is with cards with low demand - auctions depend on a fight.

4) I am still perplexed at collectors seeming infatuation with auction houses for a large majority of the items that get sold there. For cards with a good supply and an easily established "market price", an educated collector could get more $$ consigning privately (shameless plug), or the same $$ selling outright to a reputable dealer wanting said card(s) for their inventory.

Reserves don't bother me. I very rarely win one that has one, but that is the consignors choice. When I sold my first collection through HA there were no reserves. That's a true auction.
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As an auction we don't do reserves. We feel it stifles bidding. Yes, we do lose consignments because of that, but we feel in the long run the more comfortable our bidders are, the better our consignors will do.

Auctions with reserves are the "listening to offers" posts of auctions.

1. Like Howard said, if a reserve is not met that does not always mean that the seller is responsible for the BP. That is negotiable and my guess is that no smart seller would ever agree to shouldering the BP.
2. Reserves never bother me when I bid, just like BPs or taxes not bothering me. I know my all in limit and bid accordingly.
3. I don't think the Young will sell with that reserve because I think the all in price for the card with that reserve is more than the card is worth, not because it has a reserve.

I am not a fan of reserves but I can understand its usage in some cases.
Especially if the seller has a lot into the card. We all know these posted prices of cards sold publicly but do not know if the cards sold privately and if the seller has significant invested in it and is afraid of a loss. Perhaps the seller is “attached” to the card and is not willing to sell unless their price is met.

When you sell privately you have a price that you are willing to sell at and if others give offers you are not happy with you as the seller say No. you control your reserve since you decide when to sell it.

So if the seller wants to have a reserve and if the auction house agrees to it and they negotiate whatever they negotiate then they are all just playing by the agreed upon rules.
We may not like it but it is the right of the seller to sell or not sell as he chooses.
I agree with most no reserves usually means more bids and hopefully higher sale prices.
And as mentioned many auction houses do not do reserves and sometimes loses opportunities to sell certain items. Again there choice to have their auction there way.
Would love to see those items sold and go to a good collectors home. But potentially not and potentially redone another time.

There do seem to be different mechanics when it comes to applying reserves, which I think can lead to different results.

For example, some auctions advertise that there is a reserve from the start. Others wait until a couple of days before closing before disclosing that there is a reserve, and often even telling you what that reserve actually is.

My experience is that having an unknown reserve (i.e. you know there's a reserve, but have no idea how big it is) from the start has a chilling effect on the bidding, where many bidders won't even bother, because they assume the reserve is so high that it's impossible to get there. On the other hand, having a reserve that sneaks up on you suddenly a couple of days before closing can also stifle bidding, but at least it gives the market a chance to first see if it can clear the reserve before it ever kicks in. Plus if you know what the reserve is, then you can always make an informed decision about whether it's worth continuing to bid, or whether you should just abandon all hope.

Some auctions will basically let you bid at the reserve price unilaterally. Others require that you need a partner in crime to bid against you to get up and over the reserve price.

My experience is that if you need a partner in crime, then it's probably game over, because you can put in a fat bid, but when everyone else gives up, then forgeddaboutit. If you can hit the reserve price unilaterally, then at least you have the option to go there if you really want to.

I've recounted the story here before (although I can't seem to find it to just copy/paste now) of a 52B Mays in PSA 9 that went to auction in late 2021/early 2022. It first came to market with a reserve. Bidding was going strong, and reached $100k+. Then the reserve popped at $200k ($240k with the juice) a couple of days before the auction finished, and everyone gave up. Since this was one of the AHs that let you unilaterally bid at the reserve amount, I toyed with the idea of putting in a bid at $200k, but couldn't bring myself to do it. Naturally, it went unsold.

A couple of months later, the exact same card on the exact same AH platform came up again, this time without a reserve. Things went similarly up until the last couple of days. No reserve this time. And then the price went absolutely nuts in the last day. Price doubled, then doubled again. Next thing you know, the final price (with the juice) ends up at $444k.

Bottom line for me is that if you're going to do an auction, then do an auction. Adding a reserve just seems to really screw with the whole flow and animal spirits that are the key element in the auction format. If you really want the certainty of getting your sales price, then sell it using a BIN, a private sale, or a high starting bid on eBay. Trying to get the best of both worlds seems like you end up getting the worst of all worlds.

Without diving into this matter too deeply, the judicial system does not take lightly threats directed at others, including, but not limited to, deceased baseball hall of famers.

My advice is that the original poster of the threat upon The Mickey Mantle consider issuing both a retraction and apology.


Brian

Great post and commentary here. A few thoughts:

4) I am still perplexed at collectors seeming infatuation with auction houses for a large majority of the items that get sold there. For cards with a good supply and an easily established "market price", an educated collector could get more $$ consigning privately (shameless plug), or the same $$ selling outright to a reputable dealer wanting said card(s) for their inventory.

Howard, I don't get either, but they have now set the standard for everything. Have a bin full of old tobacco cards? Send it to an auction house. Have a low grade Ruth? Send it to an auction house. Collectors and consignors are now bound by this process for a majority of cards and the AHs know it. Why do you think they are set up at every major card show? To show off upcoming sales but also take in consignments.

I understand the attraction of a reserve for the consignor, and I have often considered one when I consign. But then I recall a story by one AH owner who recounts when he tried to convince the consignor not to put a reserve on a lot, the card did not sell at the reserve, the consignor was mad so the AH purchased the card for the reserve amount, the AH then put the same card in its next auction without reserve and it closed well above the reserve amount.

Ryan, I think consignors set a reserve for a lot of factors, but I think the number 1 reason is fear. They are fearful of selling the card and not getting what they think is the value of the card. So they set the reserve. If it hits, great. If not, great, still have the card.

One last thing to consider - Heritage makes the consignor pay the BP on all amounts that do not meet their reserve. So, even if the consignors are getting 50% of the BP on the Mantle and Young, they will fork over $20k+ likely to watch their item not sell; this is the second time the Young consignor will suffer that fate. Please note, this is not about Heritage - almost all AH’s will offer reserves and I expect most take a BP even if the item does not sell; it’s just that these examples are in the current Heritage auction.

They will never tell, but I would LOVE if we could get some truth on this from these AHs. I think in the past yes, but now a days? And again, everything is negotiable.

We try and avoid reserves, but occasionally it's understandable (we've got two items in our current auction with reserves).

We periodically do customer surveys, just to make sure we're on the right track and we're meeting or exceeding the expectations of our bidders and consignors. We've asked questions about reserves, and found that 50% of our customers WILL NOT BID if there is a reserve - whether the amount of the reserve is disclosed or not.

Count me in the camp of folks that believe that low opening bids and no reserves is the best way to encourage bidders to get involved. In the eyes of most bidders, high opening bids and reserves are impediments, and I've got 11 years of anecdotal evidence to argue both cases.

When we do reserves, we insist that the reserve be a reasonable number, and then we disclose the amount of the reserve about a week before the auction closes, and then we bring the bid up to the reserve so that the next bid meets the reserve. Even still, sometimes items won't meet the reserve.

We do not charge the consignor the equivalent of the buyer's premium because we don't offer the use of the reserve as a way to go fishing for a high price. I understand a consignor wanting to mitigate downside risk by placing a protective reserve on an item, and I'm (reluctantly) happy to support that, even though I try and caution against it because I think everything that mitigates downside risk also reduces upside potential. We don't do hidden reserves, and we don't do "fishing" reserves, so there's no reason to charge the consignor, in our case.

-Al

Appreciate the ground truth, thanks Al.

As long as the AH is a quality one (hi, Al), I don't see the need for a reserve. Word will get out to the necessary bidders and quality will bring quality 99%+ of the time. As a bidder, I am with Jay on the issue: I bid what I want and if the card doesn't work for the seller at that level I move on.

Reserves deter bidding. Period.

If something was my gold standard, like I want this to fund my retirement kind of piece, I’d be terrified that it would somehow magically fly under the radar and crush me. Rational mind tells me that wouldn’t happen. But I’d be awfully worried. Maybe with my dumb luck someone offers a slightly nicer version in an other auction next week and now I’m totally in a panic …..

Can understand why a consignor might insist on one in some cases.

I agree it takes the wind out of an auction many times.

A reserve is more honest than a consignor winning back a card and the price being reported as though a real sale had occurred.

I actually would have to disagree with this sentiment.

First, if a consignor wins their own item it technically IS a sale. Of course since they are getting a portion of the sale they don't owe all that much on a percentage basis.

Second they are only one bid over what another bidder was willing to pay as opposed to the reserve method, especially as some auctions use it where they have the right to place an artificial bid up to the amount just below the reserve.

So if you have an item which has a reserve of $10,000 and it stalls at $4,000 and the auction company bids $9999 (or whatever the increment would be) and then one more bid is placed how is a sale $6000 more than the 2nd bidder was willing to go more valid than a sale to the consignor where it went one bid over what the 2nd bidder was willing to go?

To be clear, just in case, We don't allow consignors to bid on their own items, nor do we do reserves, so I'm not defending either practice for my own benefit. I don't believe either option is the best way for us.

I wouldn't be surprised if a major auction wanted something on an item with a reserve that didn't sell. Part of their value, perceived or real is the work involved in photographing describing and promoting that item. That's all work they have to pay someone for, so if the seller demands a reserve that won't be met having a way to at least defray that cost is sensible.

I am mixed on reserves. I don't really recall running into them at live auctions for items I wanted and could afford.
I did get them on Ebay sometimes, I didn't mind if the reserve was stated, or if they would reveal it when asked. But if it was treated as some big secret it generally put me off an item.

When selling, I used reserves maybe 4-5 times on things that were to me much better. In every case I was open about the reserve, and set it somewhere between what I thought the thing should sell for and what price I wouldn't be happy with. In all but one instance my reserve was so low it ended up being silly. Around 20% of the final price in one case.
The one that didn't make reserve, was an original frisbee still in the original package. The high bidder said the reserve was too high, and backed that up with links to sales on other sites that showed his high bid as slightly above average. I ended up selling to him at the high bid, which I was still happy with.

As far as using an auction house, to me it really depends on what contacts you have, and how you value your time. About 14 years ago I consigned some stuff locally. They took a big cut, but the only "work" I had to do was point what boxes and a rough idea of what was in each box.
Some stuff did about as well as I could have done. Others did much better. Overall, more results that were better than I could have gotten on Ebay, and almost none that did worse. A nice bit of cash for a few boxes of not necessarily valuable stuff. I did tell then that they had to take the 2-3 monster boxes of junkwax stuff if they wanted the better stuff, something we had a good laugh about along with the motebook of what I described as cards that used to catalog a couple bucks but don't anymore (I'd been buying stuff from them for decades, so it was for sure something we could laugh about. )

How is it technically a sale? Title never changed hands. The owner paid a fee to keep the card.

It is not a sale. The item didn't change hands. If I make a hot dog, take out my wallet and hand myself a $100 bill, I didn't buy a hot dog for $100.

In a recent auction I saw an item I sold last month to someone on BST. As soon as I saw it for sale I had sellers’ remorse. And it was selling for less than I sold it for. I wanted to bid on it and get it back. Didn’t but wish I had.

Didn’t do it but don’t see any ethical problem in buying it back.

You had already sold the item so you wouldn't have been bidding on something you currently owned and were selling. That's a big difference than what others are talking about regarding bidding on your own consignment.

Huh? When did I say or imply it was not okay to legitimately buy back a card you had previously owned? What does this have to do with fake sales where a card never changed hands and was not factually sold at all?

If Person A sells a card and person A is the winning bidder, or a proxy agent of person A is the winning bidder to hand the card back to them as part of a pre-planned operation, there was factually not a sale. You can't buy something from yourself... The most common sense of basic facts this hobby wants to disagree with is just wild sometimes lol.

Poorly explained . . .I wasn't saying it was the same situation . .. or didn't intend to. Just was a weird spot and I felt odd bidding to but back something I had just sold someone (for more).

I'm a small fish in auction-world, but for my part I'm annoyed by reserves. Usually I'll just skip an auction if there's a reserve on it. Plenty of other, non-annoying, things to go after.

Frankly, I prefer a high opening bid. Then at least I know what I'm in for if I decide to play, rather than not knowing if I'm wasting my time.

High opening bids don't mix well with auctions requiring you have a bid in in order to bid in extended time.

To me this discussion is ridiculous. The only thing that matters is the all in cost on the card. The path you take to get to that number is meaningless.

"High opening bids don't mix well with auctions requiring you have a bid in in order to bid in extended time."

I don't follow this -- isn't the only reason to be eligible for extended bidding so you can top opposing bids in overtime? Why would any bidder who wanted to bid in overtime be scared off by having to top the existing pre-overtime high bid?

I place dozens of bids on items I don’t really intend to go after in extended bidding. Having a bid in gives me the option to go after things at the end, depending on numerous factors, including the price at the time extended bidding starts. If the starting bid is real high, one may fear that they end up winning it at that price when the intent of bidding initial was not to win but to preserve the ability to bid later in the event you want to win it

But if you aren't interested in it even at the minimum bid price, why would you become interested in it later when the price would the same or higher?

Here is a good example I'm actually looking at right now. Currently there are 3 copies of a card I need for a set I'm working on at auction. They are probably going to sell in the $4-7k range each. I can afford to buy one, but definitely not all 3. I also only want 1. If the opening bid was $4k on each, I couldn't just put an opening bid in on all 3 at one time in case I ended up winning them all. I have to wait until I'm outbid on one to put a placeholder bid on one of the others. Now if the opening bid is $500, I can easily place my opening bid on all three (which I have) and see how things shake out at the end. As the number of cards you're looking for grows, maybe instead of 3 there are 10 similar priced cards you're looking at, you can get blocked out of putting placeholders in quite quickly.

People put placeholders in on many more items than they will be able to afford if they won them all. It gives one flexibility at the end of the auction. If one lot goes past what they want to pay, they can go after something else they had a placeholder on. Back when I was an auction buyer I'd put placeholder bids in on 100 or more lots fairly frequently. High starting bids would certainly scare a lot of people away from this very common practice.

Building off what Scott said, what really confuses me are minimum bids that are high, but not high enough. For example, a $5,000 minimum bid on a card valued at $25,000. It's not high enough to function as a reserve, because if it sold for 5K the consignor would not be happy. But it also might be high enough to deter people from putting a placeholder bid on it as one of 100 items, because it might take too much of their prospective budget. So why do it?

I am interested in it enough to want to preserve the ability to pursue it on the last day of bidding. I only bid on things I may end up buying, albeit the likelihood of me going after some is pretty remote.

Scott, well said. Exactly. However there are numerous reasons one may decide not to pursue a card at closing, price and ability are only two of them; you could pick up a copy between start of auction and end of auction, you could give up
a project or decide you don’t want it, you can take a closer look and decide you don’t like it. Placeholders provide optionality.

Now, there are some auctions where you don’t have to bid on a lot before extended bidding in order to bid on it in extended bidding. I do not place placeholder bids in those auctions and I almost always wait until the end to place any bid

Thanks for the response, Scott. I didn't realize that this was such a common strategy. Perhaps I'm unusual in that I don't usually place any bid that I wouldn't be comfortable with as the winning bid.

This is why I usually bid right when an auction opens. I may place over $1mm or bids within the first hour. By the end of the day, I am high bidder on none of them, but I have preserved the chance to go after all of them in extended bidding. If I wait to long and the price is already higher (like a high staring bid) then I may not do a placeholder at that point bc odds I win it are higher and I am not sure I want to own it.

Right, I take a similar approach. Plus, it's fun to enjoy that first day when you can fantasize about actually winning stuff for the price of that first bid! :p

I was left scrambling one time for a Hunt auction in the early 2000's. Got a ton of stuff WAY lower than I ever thought it would go. Ultimately it was good news, but was tense trying to get the money together lol.

Don't care for reserves, but will bid. I like high opening bid, no reserve. This way, I know what I'm willing to spend and the seller is letting me know what they are willing to settle with.

My Arod 1st Grand Slam Bat ended last night. I had an opening bid of $7,500 with no reserve. It ended at $8,250 hammer price, with BP $9,900.

I paid $3,500 for the bat in 2009. Knew I would be happy with at least $7,500+, so it's a win-win for everyone. Of course I wish it went a bit higher, but at the end of the day, I'm good.

I'm going to assume a consignor can tell the AH that they would like to ensure they receive a minimum amount for their consignments. In my mind, there's two ways to do that:

1) A reserve price (which to me isn't really an auction

2) A high opening bid

Do AHs disclose a reserve? I can remember bidding in an auction and I was high bidder at the end but I wasn't awarded the item. My assumption was there was an undisclosed reserve. Are AHs supposed to disclose if the lot has a reserve?

I'm going to guess that a consignor could set a minimum bid price for an item, but the auction house would have to agree to it. Also, does anyone know how AHs feel about a consignor setting an opening bid price?

I have seen Heritage add one later in an auction. That may be random requests.

*edit: The Punch was LOTG and as Al described they bumped one spot below the reserve within one week.

All of the Heritage items have a standard disclosure that the reserve (if any) will post 2 days prior to auction completion. And then the reserve will actually show up then if the reserve has not yet been met. The Heritage reserve is also different because they tell you precisely how much it is, and just allow the next bidder to unilaterally bid at that price.

I think they’re trying to not scare bidders away early, yet still be able to add the reserve at their chosen time if the item actually has one, and even then only if the reserve hasn’t been exceeded yet.

This idea that reserves actually cause items to under sell at auction doesn't pass the smell test to me. It sounds more like a sales pitch from a commissioned employee at an auction houses who just wants to get paid and who couldn't give two sh**s what your item sells for. At least with respect to high-end cards. Sure, nobody wants to see a reserve on a card that is easy to find and easy to comp, like a T206 Red Ty Cobb PSA 2. That might deter otherwise serious bidders because they can just grab another one, but for rare cards with much smaller buyer pools, reserves actually make a lot of sense, and I would argue that the only buyers they deter are buyers that were never serious to begin with. They only deter losing bidders, not competitive ones. Assuming the reserve is set at a reasonable price point, of course (say 75-80% of comps or something like that).

As someone who collects extremely rare copies of cards (like perfectly centered copies of key HOFers), I can certainly empathize with sellers who wish to place reserves with certain cards. As an example, I have two dead centered 1952 Topps Jackie Robinsons (there are only 9 perfectly centered copies to ever surface of this card in any grade of 3 or higher out of over 1,000 listings on VCP). A lot of buyers will look at these cards and think, "meh, there are thousands of 52 Topps Jackie Robinsons out there". They might see it and bid a little higher than they otherwise would because they know eye appeal matters, but they're not going to bid something like double or triple comps just because it's centered. They just add on a small premium to it. This type of buyer makes up the majority of the pool of bidders in an auction. However, there is another cohort of bidders, like me, who only seek out these types of cards and who know precisely how difficult each one is to obtain. To those bidders, these are rare gems. And we will pay double, triple, and sometimes even quadruple "comps" or more depending on the card. We also make up a much smaller percentage of the buying pool.

Selling cards like these can be a huge gamble if you just auction it off with no reserve. If you don't get multiple centering obsessed bidders on it at the same time, then it's going to sell for well below what someone is willing to pay for it. This is precisely what happened when I won my 52T Jackie PSA 4 last year at auction. My max bid was $35k. I won it for $20k and couldn't believe it. OC copies were doing about $17k at the time. This card should have had a reserve of at least $25k on it because of how rare the centering was. If it had a reserve, the seller would have made more money and it wouldn't have deterred me, or any other centering obsessed bidder, one bit.