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The Auction Scenario

It seems that buying stuff at an auction is becoming more and more popular as time goes on. They can be house foreclosures, local government sales, and product or equipment items you probably can’t afford to pay retail for, or simply don’t want to.

It pays dividends to know what the product is worth in both the new and used configuration. It is easy to get caught up in the frenzy when many participants want the same thing that you do.

I once attended a California real estate auction back before online auctions became popular. Lots of interested parties came to bid on a house that I valued at a pre-established price to buy, fix up, and resell at a profit. When the bidding was over, the winner paid far more than he should have for the house at a time when the local markets were slumping badly. What made matters worse, he had the auctioneer’s premium added for good measure.

The Good And The Bad Side Of Auctions

I don’t like buying things sight unseen. I at least want to have the item right before me with my eyeballs gazing directly at it. Good pictures really help, but they don’t always tell the story, especially when you must buy it as-is. It doesn’t matter if you are buying something with a promise attached, or whether it is even working or not. You are taking your chances on getting a good deal on something you want and wind up paying more for repairs than can justify the original cost.

I was into model railroading as a hobby for a while. I bid for a lot of related items on eBay. Since the site supports seller ratings, feedback, and online support, I felt comfortable bidding that way. If something went wrong and you filed a complaint, the seller could either respond or deal with eBay’s penalties. Many of the items I purchased needed repairs, but that fact was revealed on the bid page. Fortunately, most of the stuff I bought was either new or in like new condition.

I also purchased currencies, tools, and other items as well. If there was free shipping, my cost was net. A shipping charge factored into my final decision to move forward with other bids that I was interested in.

Equipment or government auctions usually involve items that are broken or near the end of their life cycle. You really should have a proper mindset for dealing with anticipated repairs and hopefully find parts for older items no longer being made.

Buying real estate through the auction process, on the other hand, is a whole different ball game. If you do foreclosures, you really need to inspect the property or have someone do it for you. Online bidding usually requires an upfront deposit so that the auctioneer knows you are capable of following through with the deal. Then you must produce enough cash within a very short period of time to fully cover the entire cost of closing the deal. You buy it as is with no recourse back to the seller if the place falls apart shortly thereafter.

The Budget Seeking parameters for my latest real estate deal was to pursue a property for a permanent residence that featured a monthly mortgage payment, with taxes and insurance included, that was less than $600. And that was for one that had at least 1800 square feet. The cheapest rent on a small apartment was $1200 on average in the area I lived in before starting my quest. You could expect a cost of twice that amount in most major cities or in a suburban environment in the overall metropolitan area.

Examples Of Some Auctions I Got Involved With 

My first auction was on eBay for several lots in Arkansas. I won the bids on several cheap lots but soon realized that no one else was bidding. It didn’t take long to figure out that they were not worth the price I paid. I then negotiated with eBay to back out of the deal. Since it was my first auction, they did not bar me from future events.

I returned a few years later and started bidding on model railroad items, power tools, and electronic gadgets. The first trick I taught myself was to never bid early in the game. Any bidders who do that are responsible for jacking up the price of an item weeks before the deadline. Once you or someone else makes a bid, it forces a competitor to up the ante, and then raise it again, and again, and so on, and so on.

What I did was wait until about 10 minutes before the deadline and set up both my computer and iPad logged in to the auction. With maybe 10 seconds left to bid, I would enter my price. This would not allow the other bidder enough time to counter unless he had a higher Auto Bid in place. If so, the second computer would give me a second chance to quickly bid again just before the deadline.

An Auto Bid is where you tell the auction house or site the maximum amount you are willing to go. Then you place a bid to just beat the existing in-place price. If the competition has an Auto Bid in place, your entry will be surpassed instantly by his account via the auction house computer. In the same manner, your bid will be protected by upping your Auto Bid in a similar scenario.

For example: A power saw has a used value of $100. The current high bid is $50. You bid $60. Immediately the message comes back that you have been outbid automatically by the other person’s in-place Auto Bid. Since you are willing to go to $125, you now need to find that persons max price without going too far.

After several attempts, you reach a figure of $85 and discover you are suddenly the high bidder. The other bidder has dropped out because his maximum price has been surpassed. If the deadline is hit, and you are still the high bidder, you win. This is as long as there is either no reserve price on the item being bid on, or the reserve has been met by your final bid.

A reserve is the lowest price a seller is willing to accept, but the actual amount is only known to the auction house computer or auctioneer..

How Does The Auction Process Fit Into The Budgeting Mandate?

Hobbies, for example, can be very expensive. By bidding on eBay, I was able to win bids at prices well below retail value. Some items were new in the box, other stuff was used. At one auction, I was able to get a slightly used powerful circular saw designed for trim work that had a retail price set at $300 for a winning bid price of $50. The pictures showed it to be in like new condition, and I found out that it really was in primo condition when I received it as promised by the seller.

In my series entitled the Budgethouse Renovator, I describe how I obtained a house at auction valued by an appraiser’s ARV (After Repair Value) at $150,000 for the winning bid price of $43,000. And that was after I didn’t meet the seller’s Reserve Price of $63,000 a few weeks earlier with my first attempt. As I continued my pursuit, I felt that it was imperative to find out what my only competitor’s maximum Auto Bid Price was while on the road returning from my inspection of the house.

While eating a meal in a restaurant on the trip, I received an email notification that a bid had been made. Along with some guesswork and analysis of where I thought the sellers current pricing scenario might be, I finally calculated the dollar amount that the competitor was probably using to set the maximum price he was willing to pay.

If you are handy at fixing stuff, even computers and other electronic gadgets can be fetched at rock bottom prices. Our son, who operates a computer repair business in New York, buys used Apple Macs at auctions for around $90. and spends a little over $100. for repair parts. Their value after renovations are in the neighborhood of $550. on up.

My current search is for a small tractor/mower that can cut grass and do other chores. If it also has a power take off I can add-on equipment like scoops and scrapers for moving dirt. An auction might just fit the bill to get what I need at a really good price. They are very expensive new, but if I can look past cosmetics, gems can be found in the rough.

Granted this is risky business, but can be fun and rewarding if you do your homework. After all, isn’t life a gamble anyways?

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I am requesting that my readers click on the links provided and download a sample read of each book and give a review on Amazon. You will have free access to the first four chapters of each book. My hope is that you will like the story lines enough to obtain either an eBook version or a paperback copy that you can put on your bookshelf as a masterpiece when you are done. FATE STALKS A HERO I: RESURGENCE, FATE STALKS A HERO II:THE FIJI FULCRUM, and THE SAGA OF HERACLES PENOIT. I will be giving excerpts on these works in upcoming blogs to familiarize you the reader with exciting details about the contents of each one. Thank you!

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