Auctions can be a fun way to spend a Saturday—or a lucrative side-hustle for finding incredible bargains. You can buy just about anything at an auction, often for better prices than retail. However, if you’re not careful, you could end up overspending or feeling completely lost during the fast-paced bidding experience.
This guide will help you master basic auction terminology and rules—plus offer a few strategies for winning your first lot!
Types of Auctions
Live auctions are what most of us think of when we hear the word “auction.” These typically take place at an auction house, where an auctioneer (or bid caller) will offer up lots one at a time to bidders. And yes, they really do that super-rapid mumbling speech thing. This is called the “auction chant,” and you’ll need to listen closely to the numbers the auctioneer is saying to follow the current bid.
Online auctions take place over the internet, but they follow most of the same rules as a live auction. The auction may be open for bidding anywhere from a few weeks to a few days. However, most of the bidding takes place in the hours—and often minutes—before the lots close. The closing times are usually staggered to mimic a live auction, with the lowest-numbered lots closing first.
Silent auctions are most often held during a charity event. Rather than live bidding, silent auctions involve writing down your bid. Each lot will have a bid sheet, and you’ll have to check back frequently to see if you’ve been outbid. If so, you can choose to write down a new, higher bid.
Things You Can Buy at an Auction
What can you buy at an auction? A better question is what can’t you buy at auction?
- Personal property
- Real estate
- Fine art and antiques
- Coins and currency
- Commercial liquidation
- Overstock and returns
- Storage units
Most auctions are of “personal property,” an umbrella term that could cover anything from art and antiques to old Tupperware. However, you can also buy foreclosed homes or used cars–something that we’ll touch on later.
Auctioneer Terminology You Should Know
Absentee Bid – Some live auctions allow a bidder to participate even if they aren’t physically present. They must make a prior arrangement to place their bids in advance.
Absolute Auction – An auction where the highest bidder wins the lot no matter what. This type of auction does not set a reserve (a minimum price that must be met in order to sell) for any item. You can get great bargains—but the bidding is often very competitive.
As-Is – A common description for items being sold at auction. It is the bidder’s responsibility to check the condition of the item, and the auction house will not be responsible or liable for issues or damage that the bidder failed to notice.
Bidder’s Choice –If several similar items are being offered, they may be presented as a single lot. The winning bidder can choose to buy one, some, or all of the items, paying the hammer price for each one they decide to take. If the high bidder does not take everything, then the auctioneer will reopen bidding.
Buyer’s premium – In many auctions, you will need to pay a percentage of the sold price in the form of a buyer’s premium.
Estate auction – A sale of a deceased person’s personal property. This can include anything from antiques to contemporary furniture to jewelry to kitchenware. A living estate indicates a whole-house sale by a person who is not deceased but only downsizing or moving.
Hammer price – The price at which an item sells at auction. It does not include any taxes or fees.
Hybrid auction – A sale that takes place with both online and in-person bidding. May also be listed as a “live and online” auction.
Lot – A single item or group of items being offered together. Every lot will have a number. Once it is called, you will have the opportunity to bid on it.
On-site auction – A sale held at a home or business instead of an auction house.
Preview – A set period of time before the auction when prospective buyers can examine the items for sale. In live auctions, this may happen the hour before bidding begins. In online or silent auctions, the preview typically happens a few days or weeks before the bidding.
Reserve – If the auction house (or the consigner) wants to get a minimum price for an item, it can be offered with a reserve. Until the reserve price is met, the item remains unsold. If the price is not met, the lot is considered “passed.”
Tips for Winning at an Auction
The first—and most important—step in auction success is paying attention to the previews. At a live auction, you will get to peruse the lots before bidding begins. Many auction houses also provide online previews so you can get a head start. Previews for online auctions are even more important; it’s not a great idea to buy anything sight unseen. Check the items for damage and wear. If you’re a collector, pay attention to makers’ marks, too. Bring a tape measure if you plan to buy furniture, along with the dimensions of the space where the furniture will go in your home.
If you have a chance, it’s a good idea to do research on anything that catches your eye. Check out eBay and Etsy to get a ballpark of what the item might sell for on those sites. If you’re really dedicated, you can also pay for an account at Worthpoint, a website that maintains a database of prices for a wide variety of antiques and collectibles.
Always make sure you understand the terms of sale before you start bidding. Most auction houses, whether you’re buying online or onsite, will charge a buyer’s premium. This is a percentage that’s added to the hammer price (i.e., the winning bid or sold price). You will also probably have to pay sales tax. If you’re planning to buy furniture or other large items, come prepared with a vehicle, moving blankets and bungees or straps, and help! Don’t count on the auction house having people there who can help you move the items.
Mentally set your maximum bid before you start raising your paddle. This is a trick that I have used many times at auctions to avoid overspending. After attending the preview and doing my research, I have a good idea of what each lot is worth. If I’m buying for resale, I’ll mentally set a price that will still allow me to turn a profit. If I’m buying for myself, my max bid is based on my personal budget as well as the market value of the item.
Using an index card, notebook paper, or spreadsheet, make three columns. In the first, write down the lot number. In the second, make a note of your maximum bid—and don’t forget to factor in the buyer’s premium and sales tax when you set that number! In the third column, write down the hammer price of any lots you win.
Expect bidding to heat up, regardless of whether you’re bidding online or in person. The most desirable lots could get dozens of bids as people battle it out to win the day. In-person, it’s easy to get caught up in the excitement. That’s why you should always write down your max bid for each lot that interests you. Online, expect bidding to take off in the last fifteen or twenty minutes before the lot closes. If bids keep coming in right before the hammer falls, the bid time may be extended by several minutes.
If you’re attending a live auction, get there early—and be prepared to stay for several hours. Most live personal property auctions contain dozens if not hundreds of individual lots. Professional auction houses may even have a snack bar for hungry bidders. If you want to bring your own food and drink, double-check with the auction house first.
When you arrive at a live auction, you’ll need to register for a number. Most auction houses will ask to see a photo ID as well as a credit or debit card. Online auctions also require registration using your billing address and payment method. The auction house will provide you with a “paddle,” which could be a piece of card on a stick or just a printout with your number on it. Hang on to this!
Bid carefully but confidently. Bidders can nod, raise a hand, or lift their paddles to place a bid with the auctioneer. They’re not likely to mistake a nose scratch for a thousand-dollar bid, so don’t be too paranoid about that. However, once you’ve placed a bid, you can’t change your mind. If you get carried away and go over budget, you’ll have to hope that someone else will outbid you.
At a live auction, you’ll typically take the lots you’ve won with you at the end of the day, but the house may make exceptions for large pieces. Online auctions typically offer a pickup window the following day. Some may also ship your items, but you should expect to pay premium prices for shipping and handling.
Special Cases: Real Estate and Vehicles
While many of the conventions for personal property auctions remain the same if you’re bidding on real estate or vehicles, the stakes are a lot higher. Many vehicle and real estate auctions require you to pay an upfront fee, and you’ll often need cash in hand to pay a refundable deposit before the bidding commences. If you win, you’ll typically have no more than twenty-four hours to finalize the sale.
These auctions may take place online or in person. Either way, you should have enough money to pay cash, including buyer’s premiums and taxes. Some auction houses also charge an additional fee for credit or debit card processing, so read the terms of sale before you attend.
Buying a car at auction isn’t like walking into a dealership. According to NerdWallet, “You can usually inspect the cars before the bidding, but most auctions won’t allow a test drive. All you can do is sit in the car, start it and possibly put it in gear. Online, most auctions provide a “condition grade” — a 1 to 5 scale with 5 being new and 3 being normal wear and tear — or a detailed list of imperfections and mechanical malfunctions.”
Real estate auctions feature inventory from foreclosures and unpaid taxes as well as estate properties. It’s certainly possible to get a cheap house this way, but you’ll also assume a lot more risk than buying a home the traditional way.
Amy Fontinelle with Credible warns that “[w]hen you buy an auction property, you might not be able to conduct a home inspection ahead of time. You’ll be stuck with whatever expensive problems you get — including dealing with any liens on the property — because the property will be sold as-is. But some sellers do allow for inspections ahead of the auction date.” The biggest hurdle for most buyers will be whether they are able to finance the property. It won’t always be possible—real estate auctions are designed for quick sales—so at the very least you would need to be pre-approved.
A real estate or vehicle sale is probably not the best place to dip your toe into the world of auctions. Instead, find a local personal property auction and check it out! It can be a lot of fun—and you just might take home a few treasures.