Why To Avoid Auction Houses

SEVERAL REASONS TO AVOID AUCTION HOUSES

We are very interested in purchasing any national banknotes you have. We of course understand that there are other buyers and other venues available. However, please do consider the following drawbacks before consigning a note to an auction house:

1. Very High Commission Fees
Most auction houses take 15% from the seller and 15% from the buyer. Collectors always factor in their buyer’s premium and bid lower.
Example: A note sells at auction for $2,000. The buyer gets charged $2,300 and the consignor only receives $1,700. That $600 spread is equal to over 26%.

2. It Take Months To Get Paid
Many auction houses only have three big auctions each year. There is a long processing lag time between consignment deadlines and payouts. From the time you ship notes to an auction house to the time you get paid is between four and seven months.

3. Lack of Attention
The goal of an auction house is to sell as much material as possible. This means selling thousands of notes over a 2-3 day period. While your note may get exposed to many people, the buyers still have to sort through thousands of notes and literally millions of dollars worth of material. Even if you have a nice note, odds are there will be much more exciting material that draws everyone’s attention and spending budget. In many cases, the auctions are so huge that the live floor bidding sessions last until 2am.

4. No Price Guarantees
Most auction companies attract business because they make very high value estimates. These estimates can purposely be unrealistically high just to assure the auction house gets the consignment.
Example: We might value a note at $11,000 and would be willing to write a check for that price – no questions asked. An auction company might value the same note at $10,000 – $13,000. However, while they value it at as much as $13,000, the starting bid will be 50% or 60% of the low estimate. That means that even though they think it might be worth $13,000, there is nothing to keep it from selling for $5,000. It is not uncommon for auction houses to compare apples to oranges to come up with unrealistic price targets just to attract the consignment.

5. Bidder Collusion
Price fixing or bidder collusion is sadly one of the dirty secrets, and a fairly common practice, of some currency collectors. There are less than a few hundred people in the country who collect national banknotes as a hobby. Of those few hundred people there are certainly less than 40 people spending significant amounts of money on currency each year. All of these top of the line collectors know each other and many of them have been acquaintances or good friends for years. Every time there is an auction, many of these people meet before hand and literally split up who gets what, to keep the prices down. It is a frowned upon practice; but there is really no way to stop it.
Example: You consign a note estimated at $40,000 to $60,000 to a major auction. This note is in a specialty collecting area of three high-end collectors. Collector A offers to give collectors B and C $5,000 each not to bid. They agree to this knowing that the next time a similar note comes to auction, collector B or C will get the chance to be the winning the bidder in the same scenario – and the cycle just continues. So while a note would have been worth $50,000 if offered privately to us, due to the auction scenario someone can buy it for $25,000 and just pay off his friends. The auction house gets their commission, the first collector gets a steal, and the other two collectors get paid under the table; everyone is happy but the consignor.

In conclusion: On the surface auctions seem like the easiest way to get the most money for a note. In reality there are many drawbacks, like near 30% commissions, an unfair lag time for payment, deceptive valuing processes, and bidder collusion. We offer next day payments, no commissions, more than reasonable prices, and the promise that everything will go exactly as expected.